OPEN  PRICE  ASSOCIATIONS 


BY 

MILTON  NELS  NELSON 

A.  B.,  University  of  Illinois,  1915 
A.  M.,  University  of  Illinois,  1917 


THESIS 

Submitted  in  Partial  Fulfillment  of  the  Requirements  for  the 

Degree  of 

DOCTOR  OF  PHILOSOPHY 
IN  ECONOMICS 

IN 

THE  GRADUATE  SCHOOL 
OF  THE 

UNIVERSITY  OF  ILLINOIS 


1921 


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PEEIFACE 


The  dissertation  which  follows  mast  he  looked  upon  as  an  introductory 
study  of  the  open  price  movement  rather  than  an  exhaustive  one.  The  movement 
being  of  comparatively  recent  origin,  the  accnimilated  data,  based  on  obser/ation 
and  experience,  necessarily  inconclusive  on  many  points.  In  consequence  it 
has  been  fonnd  necessary  in  many  instances  to  base  conclusions  mainly  on  theoret- 
ical considerations.  There  remains  for  future  investigators  the  obvious  task 
of  testing  out  these  conclusions  in  the  light  of  a more  adequate  fund  of  data. 

The  writer  desires  to  express  his  obligation  to  officers  of  open 
price  associations,  too  numerous  to  mention  by  name,  for  their  cooperation  in 
furnishing  data.  Special  acknowledgements  are  due  to  Professor  Llaurice  H. 
Robinson  of  the  University  of  Illinois  who  suggested  the  tox^ic  and  under  whose 
super/ision  the  work  has  been  brought  to  completion.  Appreciation  is  also  ex- 
pressed to  members  of  the  Economic  Seminar  (1920-1921)  of  the  University  of 
Illinois  for  permission  to  read  and  offer  for  their  criticism  certain  chapters 
of  the  dissertation. 


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TABLE  OF  CONTE'TTS 


Page 

Clia[3ter  I— TEMIIIOLOGY,  DEFINITION,  PPEVALEI^'TCE,  PUEPOSES,  AITD 

HISTOEIC  OEIGIN  1 

Cl^aracter  of  terms  in  use  to  designate  open  price  activity  2 

Open  price  associations  and  ordinary  trade  associations  com- 
pared 2 

Prevalence  in  the  various  Industries  3-11 

Di strihution  among  manufacturers,  wholesalers  and  retailers  12. 

y Objects  of  Eddy  and  other  associations  13-18 

“Historic  origin  19-23 

Eecant  developments  24 

Chapter  II— DESCEIPTION  OF  THE  COUTBINATION  AND  ASSOCIATION  DEVED- 
0?I£KNT  IN  THE  I EON  AND  STEEL  IITDUSTEY  AND  COI.PAEISON  ?JITH 
THE  OPEl^  PEICE  ASSOCIATION  25 

^ Eeporting  system  of  combinations  and  open  price  associa- 
tions compared  25-27 

‘ Objects  of  combinations  and  open  price  associations  compared  27-3S 

Eesemblances  between  statistical  associations  and  open  price 

associations  29 

^ Statistical  associations  succeeded  by  the  Gary  dinner  system  30-37 

The  Gary  dinner  system  succeeded  by  the  open  price  system  37-39 

Chapter  III— THE  EDDY  THEOEY  AND  PLAN  OF  NEV/  COLIFETITION  40 

Theory  in  support  of  the  open  price  plan  40 

Eddy's  arraignment  of  present  competitive  conditions  40-42 

Eddy' 3 exposition  of  "true  competition"  43 

Criticism  of  the  Eddy  statement  of  theory  44 


Digitized  by  the  Internet  Archive 

in  2016 


https://archive.org/details/openpriceassociaOOnels 


Knowledge,  the  essence  of  con^petition  44 

Competitive  conditions  on  the  Exchanges  45 

Vindication  of  coirpetiticn  as  conceived  hy  the  economist  46 

The  v/orth  of  Eddy' s work  estimated  46 

Criticism  of  the  Eddy  open  price  plan  47-49 

Chapter  IV— STRICTUML  FEATURES  OE  THE  O'^EN  PRICE  ASSOCIATION  50 

Voluntary  and  incorporated  types  coaqpared  50-53 

I.femb  e r ship  54_  59  - 

Officers  - 60-65 

The  Central  Office  55 

Meetings  66-70 

Chapter  V— THE  REPORTING  PLAN  71  ' 

Reporting  among  manufacturers  who  maice  goods  to  specification  71 
The  Eddy  Plan  71 

^ Deviations  from  the  Eddy  Plan  72-73 

Method  of  reporting  among  typical  Eddy  associations  73-74 

Deviations  from  methods  in  use  oy  Eddy  associations  74-75 

Reporting  among  manuiacturers  who  sell  to  jobhers  and  retail- 
ers 7S 

Standardization  75 

Differences  in  the  amount  of  information  interchanged  78 

Filing  of  price  lists  79-81 

Filing  reports  of  actual  sales  transactions  81-35 

Trade  statistics,  costs,  etc.  86-96 

Chapter  VI— THE  ADVANTAGES  AND  DISADVANTAGES  CONNECTED  Y/ITH  OPEfT 

PRICE  WORK  97 

Advantages  97-113 

Development  of  the  spirit  of  cooperation  97-100 


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Relative  "benefits  to  the  small  and  large  manufacturer  100-103 
‘^"Preventing  pixrchasers  from  overreaching  manufacturers  103-106 

•^Benefits  to  the  Government  106-107 

/ "Uses  made  of  statistics  107-113 

Disadvantages  113-127 

Handicaps  to  the  installation  of  aii  open  price  system  113-119 

Negligence  in  the  performance  of  obligations  119-123 

Deficiencies  in  the  reporting  system  123-126 

Probable  success  or  failure  of  open  price  v/ork  126-127 

Chapter  VII— OPEN  PPJCE  ACTIVITY  IN  TEE  LOI/IBER  HDUSTEY  128 

Prevalence  128-12° 

Comparison  with  the  Eddy  type  of  open  px’ice  activity  129-131 

The  Yellow  Pine  Association  132-137 

The  American  Hardwood  lihnufacturers * Association  137-148 

Public  and  economic  aspects  of  open  price  activity  143-155 

Chapter  VII I- -REGULATORY  ASPECTS  OP  OPSI  PRICE  ACTIVITY  157 

Importance  of  the  case  of  the  United  States  vs.  American 

Column  and  Lumber  Co.  et  al  157-160 

Decisions  ai^plicable  to  the  open  price  system  161-166 

Expositions  of  the  law  relating  to  the  open  price  plan  166-175 

Illegal  activities  and  suggested  remedies  175-188 

Attitude  of  the  Federal  Government  188-193 

Chapter  IX— SOI.IE  CONSIDERATIONS  IF\T0LVED  IN  A STUDY  OF  THE  INFLU- 
ENCE OF  OPEJJ  PPJCE  ACTIVITY  ON  PRICES  1S4 

Difficulty  of  ascertaining  effect  on  prices  194 

ivlathod  of  ascertaining  influence  on  prices  195-199 

llie  need  of  exercising  care  in  choosing  data  for  stxxdy  200 


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Chapter  X— OPEN  PPJCE  ASSOCIATIONS  ANN  TIIE  PUBLIC  WELEilEE  215 

The  open  price  plan  in  its  relation  to  coc5>etition  215-216 

Benefits  to  the  sellers  and  buyers  conpared  216-218 

Conditions  under  which  open  price  work  may  jeopardize  the 

public  interest  218-219 

Inadvisability  of  abandoning  open  price  work  220-221 


Establishment  of  an  open  price  bureau  by  the  Federal  Government  222-226 
Illustrative  charts 

1.  Comparison  of  prices  received  by  members  of  American  Hard- 

wood Itoif acturers ' Associations  with  those  received  by 
a non-member  follo'wing  page  197 

2.  Con^jarison  of  prices  received  by  members  of  American  Hard- 

wood  I’Aanufacturers'  Association  following  page  198 

3.  Coiipilation  of  prices  received  by  members  of  American 

Hardwood  Ivlanufacturers'  Association  disclosing  the  wide 
'^2<riation  of  prices  received  following  nage  198 

Appendix,  Exhibits  1-36: 

1.  List  of  Open  price  associations 

2.  Minutes  of  Meeting,  American  Hardwood  Manufacturers'  Association 

3.  Constitution  and  By-Laws,  Tap  & Dye  Institute 
4-36.  Deporting  forms: 

4-6.  Hickory  Products  Association 

7-9.  National  Bottle  J.'Janufacturers'  Association 

10.  Society  of  lilanufacturing  Confectioners 

11.  National  Association  of  Chair  I'lanufacturers 

12.  Ohio  Millers  State  Association 

13.  Lumbermen's  Statistical  Bureau 


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14-15. 


North  Carolina  Pine  Association 


lS-17.  Steel  Barrel  Tvlantifacturers'  Association 
18.  United  States  Potash  Producers'  Association 
IS.  News  Print  Service  Bxireau 

20.  Ohio  Iviillers  State  Association 

21.  American  Hardwood  Manufacturers'  Association 

22.  Vfest  Coast  Lumbermen's  Association 

23.  Cotton  Thread  Manufacturers'  Exchange 
24-25.  North  Carolina  Pine  Association 

26-27.  National  Association  of  Chair  Manufacturers 

28.  Society  of  Lianufacturing  Confectioners 

29.  Tool  Steel  Society 

30.  Drill  and  Reamer  Society 

31.  American  Hardwood  Manufacturers'  Association 

32.  Salt  Producers'  Association 

33-34.  National  Association  of  Box  Manufacturers 
35-36.  North  Carolina  Pine  Association 
Bibliograjjhy 
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1 


CHAPTER  I 

TEIff^IHOLOGY,  DEFINITION,  PREVALENCE,  PURPOSES,  AND  HISTORIC  ORIGIN 

TER.IINOLOGY 

It  is  not  easy  to  identify  an  open  price  association  "by  its  name. 

They  are  most  comconly  designated  as  "associations”  or  ”‘btirea-as"  or  "institutes" 

1 

or  "societies"  or  "e exchanges". 

The  terns  most  commonly  used  to  designate  the  kind  of  activity  engaged 
in  oy  open  price  a ssociations  are  "New  Competition",  "Open  Door  Comoetition", 
"Or.en  Price  Cooperation",  and  "Cooperative  Competition".  Perhaps  the  last  named 
term  is  the  most  e^qpressive  because  it  invites  attention  to  the  fact  tliat  mem- 
bers of  an  open  price  association  aim  to  cooperate  in  such  a manner  that  compe- 
tition between  themselves vdll  not  be  impaired.  The  use  of  such  a term  as  "Open 
Price  Cooperation"  is  open  to  the  objection  that  it  lays  undue  stress  on  the 
price  feature  of  the  open  price  plan.  Ifeny  supporters  of  the  plan  talce  the 
ground  that  this  activity  occupies  a position  of  lesser  importance  tlian  other 

activities  involved  in  the  operation  of  the  plan.  That  there  is  some  weight  to 

2 

this  assertion  will  be  shown  in  another  connection.  Of  course  the  garnp  criti- 
cism applies  to  the  use  of  the  term  "Open  Price  Associations".  However  it  has 
merit  in  that  it  calls  attention  to  an  activity  that  is  peculiar  to  this  type 
of  association  as  distinct  from  that  of  the  ordinary  trade  a ssociation,  namely 
price  reporting. 


1. 

Illustrations:  Airierican  Hardwood  Manufacturers'  Association;  Lumbermens' 

Statistical  Bureau;  National  Bar  Iron  Institute;  Manganese  Steel  Founders' 
Society;  Steel  lacker  and  Shelving  Manufacturers'  E:xchange. 

2. 

See  chapter  5,  p.  85. 


2 


DEFINITION 


The  open  price  association  is  an  organization  which  provides  a medium 


for  the  exchange  of  h-osiness  information  among  members  of  a given  industry 
\>»hereby  they  may  arrive  at  an  intimate  acquaintance  with  competitive  conditions 
as  they  exist  among  themselves  and  in  the  whole  industry.  The  business  facts 
most  commonly  exchanged  are  those  relating  to  prices  actually  quoted  or  charged, 
terms  of  payment,  manufacturing  and  selling  costs,  purchases,  stocks,  production, 
orders,  shipments,  inquiries,  bids,  contracts,  returned  goods,  cancellations, 
advertising  and  credits. 


price  association  and  the  ordinary  trade  association.  The  ordinary  trade 
association  is  very  loosely  organized  and  serves  only  certain  general  purposes. 
There  is  little  or  no  attempt  to  systematically  assemble , compile  and  dissemin- 
ate complete  and  accurate  business  statistics.  Meetings  are  infrequent;  mem- 
bers do  not  come  much  in  personal  contact  at  these  meetings  because  the  member- 
ship is  usually  large.  Divergence  of  interests  is  more  or  less  great,  making 
it  difficult  to  secure  harmony  of  action.  It  is  often  found  that  the  members 
of  such  an  association  do  exchange  price  information.  In  so  far  as  this  is 
done,  the  association  may  be  considered  a kind  of  an  open  price  association  but 
it  is  not  a typical  one. 


The  typical  open  price  association  is  a small,  closely  knit  organiza- 
tion. Its  members  place  heavy  emphasis  on  the  importance  of  assembling,  com- 
piling and  disseminating  among  themselves  complete  and  accurate  statistics. 

These  statistics  serve  the  purpose  of  putting  each  member  in  possession  of 
business  facts  which  will  provide  him  '/dth  a basis  for  the  intelligent  direction 
and  control  of  his  business,  if  anything,  even  more  emphasis  is  put  upon  the 
inroortance  of  securing  frequent  personal  contact  between  members.  This  is 


There  are  discernible  several  points  of  difference  between  an  open 


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. jJjrtaon*  Bess  ••?^X(p:oa  twl ^aoai  so^^oxitiBSitjB  Bai  ualli^ 

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3 


accon^jlished  by  having  frequent  meetings.  ^^Tiere  membership  is  relatively  large 
or  where  it  Is  spread  over  a wide  area  of  territory  it  is  c-ostomary  to  have 
group  meetings.  In  these  meetings  members  freely  discuss  all  matters  of  interest 
bearing  on  the  problems  of  their  industry  including  prices  that  have  been  re- 
ceived in  past  transactions.  Discussions  relating  to  future  prices  are  not  per- 
mitted. 


PREVALENCE 

The  open  price  association  is  an  American  institution.^  How  many  of 
these  associations  exist  in  the  Uilted  States  is  very  difficult  to  determine. 

One  estimate  places  the  numoer  at  250.^  A prominent  counsel  for  several  open 
price  associations,  whose  opinion  bears  weight,  states,  «It  is  probably  true 
that  no  great  industry  in  this  country  is  entirely  without  some  form  of  cooper- 
ation that  meets  at  some  point  some  principle  of  the  so-called  open  price  work. 

I have  no  doubt  at  all  that  there  are  as  many  as  three  hundred  and  possibly 
three  times  three  hundred."^  The  writer  is  informed  by  one  of  the  representa- 
tives of  a prominent  bureau  doing  open  price  work  that  the  bureau  in  question 
has  collected  a list  of  four  hundred  and  twenty-nine  open  price  associations  and 

the  opinion  was  expressed  that  there  are  in  existence  some  f oi-ir  hundred  and 

4 

fifty  of  these  associations.  However  the  informant  did  not  know  vii&t  percentage 
of  this  number  represented  associations  which  had  adopted  the  open  price  plan  in 

its  entirety.  Probably  the  number  falling  in  the  latterclass  would  be  consider- 
ably less. 


Eddy,  Arthur  J.,  Address,  American  Lumberman,  Dec,  20,  1913. 
2 * 
'Pohrbach,  C.  R. , Printers'  Ink,  Eeb.  5.  1920. 

0 

‘McFercher,  Clark.  Letter,  NOv.  22,  1920. 

'Armstrong  Bureau  of  Related  Industries,  Clilcago,  Illinois. 


ai  -fr?ne--tosox  €rr»ifi'  .*  ,:Cf2lo«B  3netttp^\  ■ytl-rtiA ijifli’X nar>&t»* 
vMd  ci  tt  Ji  '^0  4mn  * t»vo  .we/?w  rw 


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ao*rrji72S’? 


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There  la  no  doubt  that  the  late  war  gave  an  Inmettis  to  the  spread  of 
this  association  movement.  In  supnl3ring  its  needs,  the  Government  made  a prac- 
tice of  dealing  with  associations  of  manufacturers  rather  than  with  individuals. 

Many  associations  that  were  hastily  throm  together  for  war  purposes  were  kept 

1 

up  after  the  advent  of  peace,  Requests  made  by  the  Government  for  statistical 
data  relating  to  such  matters  as  stocks  of  goods  on  hand  in  any  given  industry, 
productive  capacity  of  individual  manufacturers,  et  cetera,  provided  associations 
with  a strong  Incentive  for  gathering,  and  compiling  statistics  relating  to  their 
industry.  Many  associations,  organized  to  do  open  price  work,  sprang  up.  Or- 
dinary trade  associations  added  certain  features  of  the  open  price  system  to 
their  other  functions.  Shortly  after  the  close  of  the  war,  as  a part  of  its 
avowed  purpose  of  determining  the  reasons  for  the  high  cost  of  living,  the  De- 
partment of  Justice  of  the  TJhlted  States  began  a searching  investigation  into 
the  workings  of  certain  of  the  so-called  open  price  associations.  Early  in  the 
year  1°20  a Bill  of  Con5>laint  was  filed  against  the  largest  open  price  associa- 
tion in  the  country,  the  Americsn  Hardwood  Manufacturers'  Association.  A month 
later,  the  Federal  Court  for  the  Western  District  of  Tennessee'^  granted  an  in- 
junction restraining  the  members  of  this  association  #10  were  m.embers  of  the  open 
price  plan  from  engaging  in  any  open  price  activity  ^whatever.  Subsequently  an 
announcement  was  made  by  one  of  the  assistants  to  the  Attorney  General  that  he 
considered  the  law  as  applied  in  this  case  firmly  established  and  that  any  other 

^‘Eohrbach,  C.  R.  Printers'  Ink,  Feb.  5,  1920. 

^’Journal  of  Commerce,  May  11,  1917;  May  16,  1918. 

3.Bfll  of  complaint,  American  Column  & Lumber  Co.  et  al  vs.U.  S.  Bill  filed 
in  Federal  Court  for  Western  District  of  Tenn. , Feb.,  1920. 

'^•American  Lumberman,  f.fer.  20,  1920.  Decision  rendered  in  Mar.  1920. 


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associations  operating  similarly  would  te  proceeded  against.^  These  events 
naturally  reacted  on  the  rapid  spread  of  associations  of  this  kind  and  resulted 
in  the  suspension  of  open  price  activity  on  the  part  of  many  of  them,  - at  least 
temporarily,  pending  the  outcome  of  the  spreal  that  the  memibers  of  the  hardwood 
open  price  plan  had  made  to  the  Supremie  Court. ^ The  open  price  movement  is 
therefore  now  (1921)  at  a standstill. 

Open  price  Associations  may  he  fow.d  in  all  parts  of  the  United  States 
A large  number  of  them,  if  not  the  largest,  appear  to  have  their  headquarters  in 
New  York  and  Chicago.  A glance  at  the  appended  list  of  open  price  associations^ 
will  indicate  how  widely  different  are  the  lines  of  trade  in  iflhich  they  flourish 
The  list,  vdiich  is  believed  to  be  a representative  one,  also  points  to  the  con- 
clusion that  the  open  price  movement  in  its  most  highly  developed  form  is  spread 

ing  most  rapidly  in  lines  of  trade  wherein  the  number  of  competitors  is  relative' 
ly  small. 

The  reasons  for  this  would  appear  to  be,  in  the  first  place,  that 
groups  of  competitors  in  the  smaller  lines,  not  having  the  benefit  of  trade 
papers  feel  a peculiar  need  of  some  medium  for  learning  of  conditions  of  trade. 
The  open  price  system  meets  this  need.  In  the  second  place  it  is,  srenerally 
speaking,  true,  that  the  more  numerous  the  competitors  in  a given  line  are,  the 
more  difficult  it  is  to  bring  about  effective  cooperation  bet'.i'een  them.  This  is 


^■toerlcar.  LantemBn.  fer.  20,  1920.  Statement  of  Jndee  C.  E.  Smee  Aeaiotant 
to  the  Attorney  General. 

2-For  instance.  National  Coal  Association,  Hollow  Building  Tile  Association 

National  Warm  Air  Heatir.g  and  ventilating  Association.  Several  in  lumber  indus- 
try. 

3 ■ Appen  dix , Hxh  ib . 1 . 

4. 

One  of  the  largest  if  not  the  largest  onen  -nrice  association  of  the  fifteen 

National  Association  cf  Finishers 
of  Cotton  Fabrics,  has  67  members.  The  avera.ge  number  seems  to  be  no  greater 
than  twenty-five.  See  Testimony  of  J.  Mathews  before  the  ,ioint  Legislative 
corrarittee  on  Housing,  Legislathre  of  New  York,  fjec.  29,  1^20.  up. 4602-4603. 


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fi?  ' ■■  ■'  " i 

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6 


"I 


particularly  true  w3aen  the  cooperation  required  is  of  a most  intimate  and  un- 
precedented kind.  Even  the  most  intelligent  of  business  men  find  it  difficult 
to  grasp  the  spirit  of  cooperation  which  makes  men  willing,  for  example,  to  lay 
hare  before  competitors  vital  statistics  pertaining  to  their  own  businesses. 
Filled,  as  he  is,  with  distrust  and  suspicion  of  the  motives  and  actions  of  his 
competitors,  the  ordinary  business  man  is  not  easily  reconciled  to  a program 
which  involves  cooperation  with  them  in  this  very  intimate  way.  A long  caraoaign 
of  education  must  ensue  before  these  barriers  can  be  cleared  away.  Even  v^hen 
he  has  reached  the  point  where  he  is  willing  to  cooperate,  there  is  the  diffi- 
cult task  of  teaching  him  to  be  accurate,  p-onctual  and  regular  in  reporting 
such  Ir^formation  as  may  be  requested  of  him  by  the  bureau  gathering,  compiling 
and  disseminating  the  infonnation. 

The  open  price  plan  has  been  in  existence  for  about  nine  years  only. 

It  would  seem  almost  impossible,  then,  for  lines  of  trade  with  large  numbers  of 
conpetitors  to  have  arrived  at  a very  high  stage  of  development  in  open  price 
work.  Some  industries,  like  the  textile  industry,  do  have  open  price  associations 
that  are  highly  developed  in  their  structure  and  functional  activities,  but  it 
will  generally  be  found  that  their  activities  are  limited  to  certain  lines  of 
trade  in  the  Industry,  wherein  comcetitors  are  relatively  few  and  processes  are 
more  or  less  simple  and  therefore  cocroaratively  easy  to  standardize. 

The  lumber  industry,  perhaps,  offers  the  most  conspicuous  examole  of 
the  attempt  to  secure  cooperation  of  a large  body  of  competitors  in  its  entirety 
under  the  open  price  plan.  Even  in  the  most  successful  association  of  the 
many  in  the  lumber  Industry  doing  open  price  work,  the  American  Hardwood  Manu- 
facturers* Association,  it  was  found  well  nigh  impossible  to  secure  sufficient 
cooperation  among  conpetitors  to  make  the  plan  entirely  successful.  Early  in  the 
year  1919,  after  an  existence  of  about  two  years  as  a consolidation  of  two 


-rtT  fi  aji’v-jd^'D  &di  a^ctv  arrr*  .v  ttjMZ., 

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flUfl'%<yi'T  ^ baii^Ob^t  flitJ^  Sf£t  9i  '•  *!<p[Ih^  , <f^0y f ^ 

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I '**  ■■■  '■  V-  ‘'’; 

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S .al  , rAro^o*  £5?  -j,s:ii.Itr  el  ♦!■.  eUT'-vj^*  JwX'O?  p^^’i  e»<t. 

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*!«»«•  ttrcxreXrrwnoc  .■*«oa  ''^Sf  eto^'kJ-  ‘rettoprX  orfT  - '#fl|PL  ^ 

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7 


associations  that  had  existed  for  several  years  previous,  the  membership  had 
nearly  reached  the  four  hundred  mark.  This  membership  controlled  but  twenty- 
eight  percent  of  the  total  hardwood  production  of  the  industry.^  Thousands 
of  small  sa'OTill  owners  scattered  over  practically  the  entire  Uiited  States 
east  of  the  Mississippi  Eiver  and  west  of  the  Mississipui  Mver,  in  the  States 
of  Missouri,  Arkansas,  Louisiana  and  Texas  were  not  members.  The  United  States 
Census  for  1910  gives  between  12000  to  15000  independent  hardwood  sawmills? 

Such  statistics  of  stocks,  production, et  cetera  as  were  reported  by  the  members 
would  not  give  totals  v^ich  could  be  considered  representative  of  the  hardwood 
industry,  except  in  a very  crude,  iriaccurate  wa.y.  Ehough  competitors  must  co- 
operate in  furnishing  information  to  make  it  possible  to  at  least  reduce  the 
operations  of  the  remaining  ones  to  a calculable  basis.  Those  who  did  join  the 
association  were  very  dilatory  in  furnishing  information.  It  was  found  necess- 
ary to  give  up  the  plan  of  having  all  members  make  monthly  reuorts  of  their 
production,  because  members  failed  to  do  so.' 

In  the  coal  industry  an  attempt  has  been  mde  to  cope  with  the  prob- 
lem of  getting  cooperation  among  large  numbers  of  competitors  by  having  several 
local  bureaus  for  the  gathering,  compiling  and  dissemination  of  statistics, 
each  one  of  them  being  located  in  a coal  operating  center,  l^ch  local  bureau 
then  keeps  the  operators  in  its  vicinity  lined  up,  secures  the  vital  statistics 
from  them,  compiles  them  and  relays  them  to  the  association  headquarters  where 
they  receive  further  treatment  in  the  way  of  tabulations  and  conpilations , 

^•American  Column  & Lumber  Co.  et  al  vs.  U.  S.  Argument  of  L.  C.  Boyle  before 
the  Supreme  Court,  p.  6. 

^•Ibid,  p.  35. 

3. 

. American  Column  & Lumber  Co.  et  al  vs,  U.  S.  Transcript  of  Record  Vol.  2 
p.  1107. 


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after  which  they  are  returned  t o the  various  local  exchanges  where  they  are 

1 

again  disseminated  among  the  local  operators.  Fearing  legal  conse fences,  the 

association  ceased  issuing  market  reports  in  July,  1920.  How  successful  this 

scheme  was  ingetting  the  desired  c oope  rat  ion  is  not  kno’m. 

Probably  open  price  associations  occupy  as  important  a place  in  the 

lumber  industry  as  they  do  an3nvhere  else.  The  recent  report  on  the  lumber  Indus- 

2 

try  rendered  by  the  Federal  Trade  Commission  to  the  Senate  and  the  House  dis- 
closes that  all  ten  of  the  lumber  manufacturers'  associations  affiliated  with 
the  National  Lumoer  I.lam.ifacturers'  Association  }mve  been  engaged  in  open  urice 
activity.  There  are  only  tv/o  large  a ssociations  devoting  themselves  principally 
to  the  interests  of  mantifacturers  that  are  not  affiliated  with  the  National 
Lumber  Manufacturers'  Association,  namely,  the  National  Hardwood  Lumber  Associa- 
tion and  the  American  Hardwood  llanufacturers'  Association.  Of  these  orly  the 
National  Hardwood  Lumber  Association  has  not  been  doing  open  price  work.  The 
Southern  Pine  Association  ceased  doing  open  price  work  when  the  United  States 
Attorney  General  filed  a bill  of  coirplaint  against  the  jimerican  Hardwood  R!!anufac- 
v^urars'  Association.  The  latter  association,  prior  to  the  cessation  of  its  open  | 
price  activities  v^s  not  only  the  most  notable  e^arrmlo  of  an  open  price  associa- 
tion in  the  lumoer  industry,  but  it  was  the  largest  open  price  association  in 

3 I 

existence.  | 

The  Yellow  Pine  Wholesalers’  Association  having  recently  ceased  oper-  I 
ating  under  the  open’price  plan,  it  appears  that  no  associations  of  wholesalers 
are  nov/  engaged  in  open  price  work. 

As  far  as  c;ua  be  ascertained,  only  one  retail  lumber  association  is 
doing  open  price  work,  that  being  the  Chicago  Lumber  Healers'  Association. ‘ 

The  Black  Diamond.  How  National  Association  Reports  Sales.  Oct.  11,  1319. 
’Preliminary  Report,  Federal  Trade  Commission,  Jan.  10,  1921,  ?t.  1,  p.  1. 

'For  further  discussion.  See  chapter  7,  pp.  137-148. 

Preliminary  Report,  Federal  Trade  Commission,  Jan.  10,  1921,  Pt.  2, 


p.  101. 


9 


Open  price  associations  seem  to  occnpy  a position  ot  nearly  as  great 
importance  in  textiles  as  they  do  in  Itunher.  A chronic  condition  of  cut-throat 
competition  characteristic  of  toe  textile  industry  has  ahetted  the  movementj^ 
however  the  secretiveness  of  competitors,  explained  in  large  degree  by  the  impor- 
tance to  them  of  securing  individuality  and  originality  of  styles  has  lapeded 
the  movement  as  has  a certain  determined  opnosltion  manifested  by  buyers  against 
these  associations,  particularly  in  the  knit  goods  line.^  Close  to  a dozen 
open  price  associations  are  said  to  be  in  operation.'^  All  of  these  exist  among 
manufacturers  with  the  exception  of  one  or  two  to  be  found  among  jobbers.^ 

The  first  to  adopt  the  open  price  plan  were  the  important  finishing 
firms  (bleachers,  dyers,  printers).  In  1914  they  -united  to  form  the  ”JTational 
Association  of  Finishers  of  Cotton  Ihbrics”,  Mr.  Eddy  organized  it  and  was  its 
counsel  from  the  beginning.  It  is  said  that  by  the  end  of  1916  all  of  the 
cotton  finishers  had  joined  the  association. 

Its  success  in  helping  the  finishers  to  successfully  weather  the 
depression  that  hit  the  textile  ind-ustry  in  1914  stimula-ted  mill  owners  in 
other  centers  to  adopt  the  plan.  By  the  end  of  1915  such  associations  existed 
in  Boston,  among  knit  goods  manufacturers  there,  among  mill  owners  at  New 
Bedford  and  Fall  River  and  among  certain  of  the  mill  owners  in  Southern  cotton 
centers. 

late  in  1915  a joint  council  conroosed  of  representatives  from  the  two 
national  associations,  the  National  Cotton  Man-ufacturers  Association  and  the 
American  Cotton  Manufacturers'  Association,  met  to  consider  the  feasibility  of 

^‘Journal  of  Commerce.  Sept.  18,  1916. 

^'Textile  World  Journal.  Jan.  20,  1917. 

^•Journal  of  Commerce.  Mar.  19,  1920. 

"^•Ibid.  Mar.  19,  1920. 

^•Ibid.  Mar.  19,  1920. 

^ * 

•Ibid.  Nov.  11,  1915.  Mr.  Eddy  is  called  the  "Father"  of  the  0'->en  nrlce  plan. 


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10 


joining  in  the  open  price  movement.  As  a result  of  their  deliberations  it  was 
concluded  that  because  of  the  comolicatad  and  Involved  nature  of  the  dry  goods 
trade  it  would  probably  not  be  practicable  for  the  national  associations  to 
attempt  to  do  open  price  worh,  and  that  such  work  coaid  best  be  cmt lined  and 
developed  in  each  line  of  trade  taken  as  a unit . ^ 

In  the  woolen  industry  open  nrice  work  was  inaugurated  in  1917,  when 
the  so-called  "Woolen  Exchange"  came  into  existence  under  the  auspices  of  the 
National  Association  of  Woolen  Manufacturers.^  Its  membership  represents  a 
considerable  percentage  of  the  wool  man'ufac tuning  machinery  of  the  country.^ 

This  is  now  the  only  open  price  association  to  be  found  in  the  woolen  and  worsted 
Industry. 

Eor  a few  months  the  Pennsylvania  division  of  the  National  Association 
of  Hosiery  and  Underwear  Manufacturers  operated  an  open  price  plan,  but  an  in- 
vestigation into  its  affairs  by  the  Federal  Trade  Commission  became  the  signal 
for  its  abandonment. Among  the  knit  goods  manufacturers  there  now  is  operated 
an  open  price  exchange  called  "The  Fnlt  Goods  Manufacturers  of  America".  Its 
members  control  about  one  third  of  the  entire  production  of  the  industry.^ 

Otner  associations  are  in  operation  among  the  gingham,  duck,  blanket,  silk,  and 
blouse  and  shirt  manufacturers.® 


1. 

2. 

3. 

4. 

5. 

Assn.;  Silk  Assn,  of  Anerioa;  Batlonal  Boys 
i3 louse  & Shirt  ffenufacturing  Association.  All  in  New  York  City. 


Ibid.  Nov.  11,  1915. 

Textile  World  Journal.  Aug;.  5,  1915. 
Ibid,  Jan.  13,  1917. 

Textile  World,  Journal,  May  20,  1918. 
Ibid,  May  25,  1918. 


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As  a csnter  of*  open  price  activity,  the  iron  and  steel  industry  is 
also  deserving  of  special  mention.  Hov;  extensive  the  movement  is  in  this 


industry  may  he  partially  revealed  hy  examining  the  list  of  open  price  associa- 

1 

tions  contained  in  the  appendix.  There  is  the  Institute  of  Tool  ffenufacturers, 

the  National  Bar  Iron  Institute,  the  Tool  Steel  Society,  the  Cold  BdII  Strip 

Steel  Institute,  The  Bolt,  Nat  and  Eivet  Institute,  the  Hoop  Band  Strip  Steel 

Association,  the  Bolling  Steel  Door  Society,  the  Steel  Barrel  Jfenufacturers' 

Association,  the  Architectural  Iron  and  Bronz  Manufacturers,  Steel  Lockers 

and  Shelving  I^ufacturers  Exchange,  the  Tap  and  Dye  Institute,  Steel  Bounders 

Society  of  America,  National  Association  of  Sheet  and  Tin  Plate  Manufacturers, 

Eange  Boiler  Exchange,  Pressed  Metal  Association,  National  Association  of 

Steel  Furniture  Manufacturers,  Pipe  Fittings  and  Valve  Exchange,  Manganese 

Steel  Founders  Society,  Mar^ganese  Track  Society,  the  Associated  Jvfeunufacturers 

of  Metal  Lath,  Drill  and  Eeamer  Society,  and  Bridge  Builders  and  Structural 

Society.  It  is  in  the  iron  and  steel  industry  that  the  greatest  nuaher  of 

typical  open  price  associations  seem  to  he  found.  Inquiry  develops,  that 

2 

with  a few  possible  exceptions,  the  associations  here  listed  were  either 
organized  hy  Mr.  Eddy  or  hy  men  who  came  under  his  influence,  directly  or 
indirectly.  The  mjority  of  them  are  in  small  industries,  relatively  speak- 
ing, and  even  the  larger  inchastries  have  relatively  few  competitors.  It  may 
he  wortliy  of  note  that  the  United  States  Steel  Corporation  is  not  a member 

of  any  open  price  associations.  All  of  the  independent  makers  of  iron  and  steei, 

3 

however,  are  understood  to  he  members. 


This  list  is  not  thought  to  he  complete.  See  appendix.  Exhlh.  1. 

2. 

Steel  Barrel  Association;  Associated  Manufacturers  of  Metal  Lath;  National 
Association  of  Steel  Furniture  Manufacturers 

names  of  open  price  associations  in  other  industries  consult  list  of 
Open  price  associations  in  appendix  Exhih.  1. 


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(V  ' • ' ii  ■ -i  ' 


With  respect  to  the  relative  distribution  of  open  price  associations 
among  manufacturers,  wholesalers  and  retailers,  it  may  be  said  that  the  move- 
ment is  almost  exclusively  confined  to  the  manufacturing  class.  One  or  tv/o 
associations  are  known  to  be  operating  among  jobbers  in  the  textile  industry,  ^ 
and  one  among  a group  of  retailers  in  the  lumber  industry.^  Until  recently 
one  was  in  operation  among  yellow  pine  lumber  wholesalers.  Wholesalers  and 
retainers  generally  carry  so  many  different  lines  of  goods  that  they  find  it 


inrpracticaole  to  associate  themselves  in  open  price  work.  Retailers  do  not 
especially  need  to  exchange  information  xvith  respect  to  prices  because  they  are 
in  the  haoit  of  marking  their  goods  so  that  everyone,  including  competitors, 
may  know  what  prices  are  being  asked.  Farthennore,  it  is  to  be  reniembered 
that,  since  wholesalers  are  engaged  principally  in  buying  and  selling,  they 
have  built  up  an  organization  which  is  highly  efficient  in  securing  its  own  mar- 
ket information,  and  therefore  they  are  as  a class  less  dependent  on  such  aid 

as  mignt  oe  furnished  to  them  by  an  open  price  association  than  are  the  manu- 
facturers. 

PURPOSES 

The  ultimate  aim  of  all  open  price  associations  is  to  effect  greater 
stability  in  business  conditi  ns,  in  order  that  profits  may  be  made,  if  not 
greater,  at  least  more  steady,  dependable  and  calculable  from  year  to  year,^ 


2*  Journal  of  Commerce,  Mar.  19,  1920. 

(ie)The  Chicago  Retail  Lumber  Dealers*  Assn.;  See  Reno rt, Federal  Trade 
^mmission  , Jan.  10,  1921,  Pt.2,  p.lOl. 

^0  stabilize  nrice,  but  **increase 

the  margin  of  profit".  See  Textile  World  Journal,  Apr .3, 1916,  p.l703 


. jfcr.  nr  \ . 


\ 


4 


14 


the  Interests  of  their  hnslness,  and  to  legally  acquire  and  disseminate  valuable 
mercantile  and  economic  infonnation  of  interest  to  its  members,  thus  securing  by 
fair  and  la'vful  means  the  benefit  of  cooperation.”^  There  is  very  little  hint 
here  of  the  existence  of  open  price  activity.  In  fact  open  price  work  in  this 
instance  is  confined  to  a weekly  report  of  prices  received  v^hich  members  mail 
to  the  secretary,  who  in  turn  tabulates  these  prices  and  mails  them  in  mimeograph 
form  to  the  contributing  members. 

2 

Another  constitution,  typical  of  the  lumber  industry,  sets  forth 
nine  ob.jects,  but  only  one  of  these  mirrors  to  any  extant  the  purposes  us\ially 
associated  with  open  price  work.  This  is  the  second  object  and  reads  as  follows: 
”To  gather,  compile  and  disseminate  data^reports , statistics,  and  information 
relative  to  the  properties,  uses,  values,  production,  transportation,  distribu- 
^ion,  and  consumption  of,  and  markets  for  lumber  srnid  other  forest  products  in 
all  markets,  and  the  best  and  most  economical  miethods  of  manufacturing,  handling, 
transporting  and  disposing  of  said  forest  products;  to  gather,  compile  and  dis- 
seminate information  as  to  the  taxation  of  forest  products  and  of  timber  lands 
and  the  cultivation,  protection  and  conservation  of  forests.”^ 

Returning  to  a more  detailed  consideration  of  the  objects  as  set  forth 
by  the  typical  Eddy  association,  it  is  foind  that  no  one  object  receives  more 
emphasis  than  that  which  aims  to  promote  cordial  and  friendly  relations  among 
members.  The  ordinary  trade  association  makes  this  one  of  its  objects,  too,  but 
the  open  price  association  aims  to  make  its  accomplishment  more  certain  by  having 

Constitution,  Ohio  Millers  State  Association. 

2 ‘Constitutions  of  the  So-'jthem  Pine  Association  and  the  American  Hardwood 
Manufacturers’  Association  resemble  more  those  of  the  Eddy  Associations. 

3 . 

Constitution,  West  Coast  Lumber  Tfenufacturers * Association. 


A 

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15 


meetings  at  frequent  intervals.  Members  of  the  ordinary  trade  association 
•asually  meet  once  or  twice  a year.  The  motive  in  promoting  cordial  and  friendly 
relations  among  members  is  to  so  far  as  possible  ’’remove  mi  stinders  tan  dings  and 
ill  feelings  due  to  the  spreading  of  false  reports  and  baseless  charges  and  ig- 
norance of  conditions  prevailing  in  the  industry.”^ 

A second  object,  of  little  less  importance,  is  that  which  refers  to 
the  collection  and  dissemlnat^ion  of  accurate  in-formation  relating  to  the  Industry, 
Including  statistics  of  prices.  The  National  Association  of  Finishers  of  Cotton 
Fabrics  puts  it  this  way:  ” To  collect  and  disseminate  accurate  information  re- 

lating to  the  finishing  of  cotton  fabrics,  to  the  end  that  each  finisher,  how- 
ever small  his  output,  may  be  placed,  in  so  far  as  data  for  the  intelligent  con- 
duct of  his  business  goes  on  a footing  of  equality  with  other  finishers.^  It 
be  worth  noting,  in  passing,  that  it  is  here  considered  a valuable  object 
to  help  put  the  small  competitor  on  a footing  of  equality  with  the  larger  compe- 
titor in  the  matter  of  knowledge  of  business  conditions.  The  fifth  object  of  the 
Bridge  Builders'  Society  is  ”to  establish  frankness  regarding  terms,  bids,  prices 
actually  made . w With  reference  to  prices,  nearly  alwa3;^  there  is  to  be  foiuid 
a provision  vihich  prohibits  members  from  discussing  what  their  future  prices  are 
to  be.  This  provision  is  intended  to  make  it  clear  that  there  is  to  be  no  attempt 
to  control  the  trend  of  future  prices,  but  merely  to  record  past  prices.  To 

4 

attempt  to  control  future  prices  would  be  illegal. 


^‘Constitution,  Society  of  Manufacturing  Confectioners. 

2. 

Constitution,  National  Association  of  Finishers  of  Cotton  Fabrics,  quoted  by 
H.  E.  Tosdal,  Open  Price  Associations  , Fccnomic  Eeview,  June  1?  1917. 

3 ' * 

‘Constitution,  Bridge  Builders'  Society,  qiioted  by  H.  E.  Tosdal,  Ooen  Price 
Associations  , Economic  Eeview,  June  17,  1917. 

4, 

This  is  discussed  in  chapter  eight,,  pp.  161-162. 


- t 


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16 


In  this  connection  the  following  quotation  is  fonnd  to  he  typical: 

” To  bring  out  into  the  open  all  existing  competitive  conditions  and  to  introduce 
an  open  price  policy,  to  the  end  that  ^'^latever  price  information  is  distributed 
will  be  absolutely  accurate  and  confined  to  uurelv  statistical  ir.formfl.t1  on  r,.- 
garding  sales  and  prices  that  have  been  Ar^.tnaliy  piade.  Nothing  herein  stated 
permits  any  member  to  file  or  otherwise  give  any  information  regarding  any  urice 
he  expects  to  make  or  would  like  to  obtain"^ 

Provisions  that  there  are  to  be  no  pens.lties  of  any  kind  in  connection 
with  the  operation  of  the  plan  are  of  course  put  in  in  order  to  show  the  clear 
line  of  separation  that  exists  between  open  price  associations  and  combinations 
that  attempt  to  enforce  agreements  to  control  output  or  prices  hy  means  of  penal- 
ties. The  only  penalty  usmUy  provided,  if  it  may  he  called  such,  is  that  those 
do  not  file  the  information  called  for  by  the  reporting  plan,  get  no  informa- 
tion. Those  who  file  only  part  of  the  information  called  for  get  like  informa- 
tion in  return,  and  no  more.  One  association  has  an  additional  penalty  to  the 
effect  that  a failure  to  report  for  twelve  days  in  six  months  will  cause  the 
member  falling,  to  be  dropped  from  membership.^  The  laxness  shown  in  reporting 
have  made  provisions  of  this  kind  necessary. 

The  further  provision,  that  members  are  to  he  free  to  at  all  times 
quote  such  prices  and  terms  as  they  please,  also  alms  to  show  clearly  that  the 
open  price  association  has  nothing  in  common  with  illegal  combinations  of  one 
kind  or  another  that  attempt  to  put  price  restraints  unon  members.  It  may  be 


Constitution,  Society  of  Manufacturing  Confectioners 

2._ 

Beportlng  Plan,  American  Hardwood  Manufacturers'  Association,  Transcrint  of 
Eecord,  American  Column  & Lumber  Co.  vs.  U.  S.  Vol.  1 -d.86. 


. • w ^ ■ 


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-V*  • ■*•  V V' 


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17 


said  in  this  connection  that  some  open  price  associations,  at  least,  expect 
members  who  have  made  a particnlarly  low  price  to  explain  in  meeting,  the  reasons 
that  pronpted  them  to  maJ^^e  this  low  price.  Others  merely  provide  the  onport'cin- 
ity  for  such  explanations  to  he  made.  As  a rule  no  one  hut  the  secretary  kno'ws 
the  identity  of  the  persons  that  have  made  this  price.  'Without  actually  making 

their  identity  kno'ATi  he  will  invite  such  persons  to  make  an  explanation  if  they 

^ ^ 2 
care  to  do  so. 

The  promotion  of  publicity  in  all  business  transactions  and  absence  of 
secrecy  in  meetings  and  in  association  operations  is  insisted  on  by  those  asso- 
ciations v^hich  endeavor  to  strictly  follow  the  principles  laid  down  by  Mr.  Eddy. 
Mr.  Eddy  writes  as  follows:  *'  There  is  no  reason  why  the  American  manufacturer 

should  not  throw  his  da  op  open  to  customers,  ’;fey  he  should  not  mark  everything 
he  makes  in  Plain  figures  and  let  every  body  know  what  those  figures  are,  chang- 
ing them  as  he  pleases,  but  changing  them  to  all  alike,  making  such  discounts  as 
he  pleases  on  large  orders,  but  makir.g  them  openly."'^  Inquiry  develops  that  few 
of  the  open  price  associations  are  willing  to  go  to  the  length  of  Inviting  buyers 
to  utilize  infonration  that  has  been  collected  in  the  central  office.  The  Hardwood 
Mantifacturers'  Association  is  a notable  exception.  In  this  case  the  Manager  of 
Statistics  encouraged  buyers  to  make  inquiries,  for  exainple,  regarding  the  loca- 
tion of  items  of  stocks  of  lumber  and  the  quantities  available.^  Some  of  the 
associations  permit  members  to  invite  customers  to  attend  meetings;®  others  do 


^*Lord,  F.  W. , Ethics  of  Contracting  and  Stabilizing  of  Profits,  p.l74. 

2*The  National  Association  of  Box  Manufacturers  follows  this  procedure. 

3.  Eddy,  J.  New  Competion  , 1912,  p.108. 

4. Pecord,  Smerlcan  Col.  <?■  Lum.  Co.  Vs.  U.  S.  Vol.  II,  p.llOl. 

K 

'^'Eor  instance.  Society  of  Manufacturing  Confectioners,  American  Hardwood  Manu- 
facturers’ Association. 


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18 


not.  The  Hardwood  Association  was  very  free  in  permitting  outsiders  to  attend 

meetings,  and  hardly  a meeting  passed  that  was  not  attended,  either  hy  customers, 

2 

representatives  of  the  press,  or  other  outsiders.  It  is  evident  that  few  mem- 
bers of  open  price  associations  have  yet  reached  the  uoint  where  they  are  will- 
ing to  confide  their  business  affairs  to  the  public.  This  is  not  to  be  wondered 
at.  The  idea  that  business  should  be  conducted  in  secret  has  so  long  had  poss- 
ession of  the  business  man  that  it  will  take  years  of  education  to  persuade  him 
to  adopt  the  policy  of  full  publicity.  In  the  retail  trade,  "it  has  taken  a 
century  to  grow  into  the  one-price-plainly-marked  policy. 

The  object  \*\hich  calls  for  the  correction  of  all  unintellig-^nces 
is  in  lin.e  with  the  idea  that  ignorance  of  competitive  conditions  is  a millstone 
to  industrial  prosperity.  In  this  connection,  the  paimose  as  expressed  by  the 
Hardwood  Manufacturers’  Association  is  "to  disseminate  among  members  accurate 
knowledge  of  production  and  marketing,  so  that  each  member  may  gauge  the  market 
intelligently  instead  of  guessing  at  it."'^ 

Cooperation  in  devising  cost  accounting  systems  and  cooperation  in  the 
standardization  of  sizes  and  dimensions  are  not  functions  that  are  peculiar  in 
any  sense  to  open  price  associations.  These  are  very  common  activities  of  the 
ordinary  trade  association.  Knowledge  of  costs  makes  an  intelligent  competitor 
out  of  any  ignorant  one.  Open  price  associations  can  therefore  not  afford  to 
ignore  this  function.  Although  only  a few'  associations  give  the  special  mention 
of  cost  accounting  that  its  importance  warrants,  yet  it  will  be  found  that  prac- 
tically all  open  price  associations  are  engaged  in  cost  educational  work.  It 


Steel  Barrel  Manufacturers'  Association. 

? 

'Minutes. of  Meeting,  Becord,  American  Col.  & Lumber  Co.,  vs.  U.  S.  Vol.  1 p 
165. 

3. 

Eddy,  A.  J.  Mew  Competition.  1912,  p.  115. 

"^•Gadd  Exhibit  "B",  Becord,  American  Col.  & Lumber  Co.  vs.  U.  G.  Vol. II,  p.1226. 


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is  noteworthy  that  one  association  states  that  its  purpose  in  devising  a uniform 

system  of  cost  accounting  ”is  not  to  impose  upon  any  member  any  cost  items  or 

1 

to  use  in  any  manner  the  cost  system  as  a means  for  controlling  prices.  " Coop- 
eration in  standardization  of  sizes,  dimensions  and  processes,  et  cetera  is  an 
integral  part  of  the  worm  of  all  open  price  associations  "because  prices  cannot 
he  intelligently  coEparsd  unless  the  products  subject  to  price  quotation  are 
comparable  in  size,  shape,  and  quality. 

Otner  objects  of  open  price  associations,  s'nch  as  the  exchange  of  in- 
formation relating  to  contracts,  returned  goods,  cancellations,  advertising  and 
credits  are  not  usually  given  ^ecific  mention  in  constitutions  but  are  provided 

for  by  some  such  clause  as  "the  collection  and  dissemination  of  statistics  of 

2 

importance  to  the  industry." 

HISTORIC  ORIGIN 


Tne  earliest  open  price  associations  of  which  record  can  be  found  had 
their  birth  in  1911  in  the  iron  and  steel  industry  and  in  the  lumber  industry  in 
1912. 


In  the  iron  and  steel  industry,  the  earliest  association  on  record  is 
that  of  the  Bridge  Builders'  Society,  now  known  as  the  Bridge  Builders'  and 
Stractural  Society,  with  headquarters  in  New  York  City.  This  society  was  organ- 
ized by  Mr*  nddy  in  1911.  Twenty-five  comx:ianies  doing  structural  and  bridge  work 
went  into  it.  Only  one  important  independent  concern  did  not  join;  this  was  a 
subsidiary  corporation  of  the  Ikiited  States  Steel  Corporation,  namely  the  Imeri- 


1. 


2. 


Constitution,  Ehit  Goods  llfgrs.  of  America. 


Textile  World. 


May  19,  1917. 


The  following  exception  Is  noted:  "To  diffuse  accu.rate  and  reliable  infor- 
matlon  among  Its  members  as  to  the  standing  of  merchants  and  others  en^ao-ed  in 
selling  of  knit  goods  or  the  furnishing  of  materials  therefor." 
Quoted  from  Constitution,  Knit  Goods  Mfgrs,  of  America.  Textile  World,  May  13, 


20 


can  Bridge  Co.  w.  Eddy  organized  this  association  strictly  along  the  lines  ad- 
vocated In  his  book  vdilch  made  its  appearance  a year  later. ^ Meetings  were  to 
be  held  once  a month.  They  were  to  be  public.  All  orders,  prices  and  tonnage 
were  to  be  reported  to  a secretary.  Those  viho  filed  copies  of  bids  pertaining 
to  any  given  piece  of  work  would  immediately  receive  a statement  from  the  secre- 
tary showing  the  prices  indicated  on  all  the  other  bids  that  had  been  filed. 
Orders  vrould  be  handled  in  the  same  way.  Once  a month  the  secretary  would  re- 
port to  the  whole  society  the  tonnage  taken  by  each  member  during  the  past  month, 
together  with  the  total  tonnage.  A constitution  and  by-laws  were  adopted  simi- 
lar in  form  to  those  vhich  have  been  described  as  being  typical  of  the  Eddy 
associations.  The  following  quotation  taken  from  the  fifth  object  of  the  con- 
stitution illustrates  the  care  taken  to  mate  clear  that  there  was  no  intent  to 
restrict  competition.  ETo  this  end  each  member  of  the  society  agrees  to  file 
with  the  secretary  copies  of  all  bids,  terms,  and  prices  within  such  period 
after  same  are  made  as  may  reasonably  be  required  by  resolution  or  by-law,  it 
being  definitely  understood  that  each  member  is  at  all  times  free  to  make  such 
bids  and  quote  such  terms  and  prices  as  he  pleases,  and  to  change  the  same  at 
will,  either  before  or  after  filing  with  the  Secretary,  either  before  or  after 
receiving  information  regarding  bids,  terms,  and  prices  made  by  others,  the  only 

obligation  being  to  file  promptly  all  bids,  terms  and  prices  as  the  same  may  be 

2 

from  time  to  time  made,” 

The  second  open  price  association  to  be  founded  in  the  iron  and  steel 
industry  was  the  ffenganese  Track  Society,  in  1912,  and  the  third,  the  Manganese 


‘Eddy,  A.  J.  Mew  Comoetition  Mew  York,  1912. 

2 . 

Testimony  of  J.  S.  Dean,  Record,  U.  S.  vs.  Ikiited  States  Steel  Corporation 
Vol.  2,  pp.  797-811. 


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21 

Steel  FoTjnders'  Society,  In  1913.  They  were  patterned  after  the  Brldf^e  Builders' 
Society,^  Following  these  the  zEoven.ent  took  on  greater  rapidity,  with  the  result 

that  there  now  exists  a score  or  more  open  price  associations  in  the  iron  and 
steel  Industry. 

The  lumber  manufacturers  started  to  work  out  their  own  system  of  ex- 
changing Information  relative  to  stocks,  production,  shipments  and  sales  as  early 
as  1912,  Even  before  this  time  the  then  largest  association  among  lumber  manu- 
facturers, the  Yellow  Pine  Association,  later  reorganized  under  the  nam.9  of  the 
Southern  Pine  Association,  was  collecting  statistics  of  stocks,  production,  and 
shipments  and  occasior^ally  the  secretary  would  call  for  a report  of  sales. ^ He 
used  these  reports  of  sales  as  a basis  for  makir^^  up  a price  list  and  also  as  a 
mecns  of  learning  how  closely  members  were  conforming  to  the  price  list  previous- 
ly issued.  In  making  un  the  new  price  list  the  secretary  would  include  in  it 
only  the  highest  prices  shown  by  any  of  the  sales  reports.  The  list  would  then 
be  issued  to  members  with  the  understanding  that  it  was  to  he  used  as  a guide  in 
quoting  future  prices.  The  result  was,  in  the  ^^ord3  of  the  ^udge  of  the  Suprem.e 
Court  of  Missouri,  who  condemned  this  practice,  that  "prices  charged  revolved 
about  prices  fixed  like  planets  in  their  orbits  revolve  about  the  sun."^ 
plan  was  a price  boosting  scheire  pure  and  simple.  It  was  altogether  incompatible 
with  the  onen  nrice  plan  vihich  requires  that  members  are  to  be  free  to  quote 
such  prices  as  they  nlease,  and  that  all  prices  filed  with  the  secretary  shall 
he  reported  by  him  to  the  members,  be  they  high  or  low.  Follo’wing  this  condemna- 
by  the  court,  the  yellow  pine  manu.facturers  Involved,  reorganized  on  legitimate 


Eecord,  U.  S.  vs.  United  States  Steel  Comoration 
Vol.  20,pr.  7970,  7971.  ' " 

2 

•As  early  as  1906.  State  vs.  Arl-snsas  Lumber  Co.  et  al  159  S n 1=6 

3- Ibid  p.  156.  ’ ' ’ 

4. 

Ibid.  n.  177. 


, 4 


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22 


open  price  lines.  It  was  at  this  reorganization  meeting  that  some  of  the  men 
present  called  Mr.  Eddy's  attention  to  the  fact  that  the  plan  he  was  explaining 
to  them  was  already  heing  tried  ont  in  a small  way  hy  a grorp  of  1‘umher  manufac- 
turers in  Mississipni.^ 

Inquiry  made  hy  the  writer,  of  one  of  the  men  present  at  this  meeting 
elicits  the  follo'wing:  "The  account  that  you  found  in  the  American  Lumherman, 

December  20,  1913,  is  correct.  The  open  price  idea  'was  started  in  Laurel,  Miss- 
issipni,  by  a group  of  three  or  four  mills  in  this  city  in  .an  informal  way.  at 
that  time  each  mill  made  four  or  five  copies  of  orders  received  each  day  and 
sent  one  of  these  copies  to  each  of  the  other  mills  in  town.  After  a time,  other 
neighboring  mills  asked  to  be  put  on  the  exchange  list  and  some  four  or  five 
nearby  towns  'were  added.  No  central  secretary  was  used  in  comnillnK 
or  sending  out  the  information.  Tnis  system  ran  along  for  several  months  and 
'was  very  successful  and  beneficial. 

"In  December  1913,  Mr.  Eddy,  an  attorney  living  in  Chicago,  requested 
the  yellow  pine  representatives  to  meet  him  in  St.  Louis  to  hear  a talk  on  the 
open  price  corrpetition  idea,  which  he  had  developed  in  several  other  industries. 
The  writer  attended  this  meeting  and  much  to  his  surprise  found  out  that  Mr. 
Eddy's  plan  was  merely  an  elaboration  of  the  sustsm  which  we  already  had  in  ef- 
fect. 

"Aether  or  not  Mr.  Eddy  was  the  originator  of  the  idea,  I am  unable 
to  state.  It  may  be  that  in  1913  we  read  of  his  plan  and  tried  it  on  our  o’*vn 
initiative.  I cannot  state  positively  v^hether  this  is  the  case,  cr  vh.ether  the 
same  idea  occurred  to  us  without  knowledge  of  Mr.  Eddy's  plan. 

^‘American  Lumberman,  Dec.  20,  1913, 

2 

‘Gardiner,  P.  S. , Letter  dated  Nov.  26  1920. 


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23 


It  would  appear  from  this  that  although  Mr.  Eddy's  influence  in  the 
lumber  industry  was  early  felt,  there  is  some  room  for  belief  that  the  onen 
price  movement  in  an  elementary  form,  at  least,  had  originated  in  certain  locali- 
ties independent ly  of  Mr.  Eddy's  intervention,  if  not  of  his  influence.  This 
point  of  view  is  further  substantiated  by  information  received  from  the  secre- 
of  a lumber  manufacturers'  association  having  headquarters  in  Oregon.^  He 
writes  as  follows:  " You  are  right  in  sumosing  that  this  association  has  oper- 

ated an  open  price  plan,  or  as  we  have  called  it,  an  infor-mation  bureau, 
since  1912.  Our  idea  originated  in  a way  within  the  association,  but  it  first 
became  effective  locally  in  certain  regions  on  the  West  Coast,  xihere  the  ngcnu- 
facturers  of  fir  created  small  exchanges  independently  for  the  exchange  of  sales 
data."  He  adds,  however,  "-out  it  is  my  recollection  that  a book  was  written  on 
the  subject  and  that  the  writer  of  the  book  or  pamphlet  made  numerous  addresses 

on  the  subject  in  various  parts  of  the  country.  I am  inclined  to  think  that 

2 

this  was  the  origin  of  the  idea."  He  is  undoubtedly  referring  here  to  Mr. 

Eddy.  So-called  "Information  Bureaus"  also  were  developed  in  the  year  1912  by 
the  West  Coast  Lumbermen's  Association,  the  North  Carolina  Pine  Association,  and 
the  Northern  Hemlock  and  Hardwood  Manufacturers'  Association. 

Evidence  seems  to  warrant  the  conclusion  that  the  origin  of  open  price 
associations  in  the  lumber  industry  is  attributable  to  the  publicity  that  Mr. 

Eddy  gave  to  his  plan  in  the  years  of  1911  and  1912. 

The  lumber  and  iron  and  steel  industries  offer  the  earliest  examples 
of  open  urice  associations  on  record.  The  other  industries  seem  to  have  followed 

^•Western  Pine  Manufacturers'  Assn. 

2. 

’A.  F.  Coouer,  Secretary,  Western  Pine  Manufacturers'  Assn.  Letter  Dec  17 
1920. 


s 

ril  . ;?  ♦■••'sifjri*  ^sscwye^  flaow  il 

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. tp  - 

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> . •'  ■ ■ ' ' , , \ " ■ -‘’‘  ■ '' '■  ^ 

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rP’ttaBi:  *<i£f  '0  Mf*  lift  c.ijfi4-ro&  <xt  trX#OoI' 

L",  - - ‘ '■'■•■,  R'lv'^ " ‘ ' I 

9^*swbto  #'^4  tit  to  i^fSJONJb*:' 

ao- •*-;  atoe<f  «.  /<trf3  aoi4CiXX.''3f»t  Tt  yi»o'^  ,8|fp«  *H 

■■-  ^ N*  ^ 

fteoeti'^s  €umsa^  •XtyU  4i?f ri^:ygiA^  tis* '^Opod  &ji4  29  -fes-^l-nv  >d4  Ji^ai'  -n^ 

4#f<l  dd  diwtlXtMft!  rt*  l '"t4  to  r»4iAj  .iw*  .I'tfjJisi  nl  i49*idb1l^ 

* S • *'  ’’’  1 ' ^ ll^. 

.tlX  o?  •toif  5diKt*tn  'jXi^lf£i’OJbc»’ «;  -tH  oif4  to  dsd  S 


I X^  S^'?f  *5*«T  fc®qpoX«tl^  ■flrjWi'  “•MoxaCr  ri\>l44hriot«I'‘’  fc/il 


A 


l/rr.?-  ,tsifJjtlfi99*-A  »»£Ti7  j>/tifot#D  tcf4  ,pcVi4*l^#*A  a’imsflff^dasBil  4tt*c?t» 

• - * . •.' 

.cc*?'*irJOi«A  ’ AoeXftwff 

^ ■'  ., 

Ac  Hi?'  fK.q[«  to  im(9  Tci9ijfc^»  -■l!^  if.-ariO^  * ‘ Acaiot  oa  .Tol-X;ir;31''’ '*J 


' ' ■ ■ - ■ ! 

V'B 

4' 


,5tI(P'l!  A/t*  ixti*  1o  ft^irv  Oft?  Ill  fliX^r^tM  -Oid  iifAiwv  ,f  ■ 


't4£Aik^>e  ?e»XXtj|«,  *^3  tstto  Xo»4*  fixs®  )io» '^idsuaX  • “ 

V ‘ 

oflot  nvstxS  04  .t*tti2f  Offf  .Maool  /»  iwroi4.«Jooil»  iSr««d  Ito’- 

» . . . 


i'rt'AO?  '*'ft*JOOtCP3X^AlCTai^ 

. ■■  X“-  'v  » < 

,Vt  ,9Ul  ,ro»i»^  '»it«T3'i;®1o’aeifc>ofl4*’' in*^f*o‘K  ‘,S'S*4'^rr?«a  .#-  .4 

'■'.oecr 


in  their  wate. 


Z4 

The  Bahson  Statistical  Organization  helned  to  popularize  the  open 
Price  inovement  hy  devoting  a session  to  it  at  each  of  its  annual  conferences  for 
manufacturers  in  1914  and  1915.^  Furthermore  this  organization  began  publishing 
as  apart  of  its  service  to  manufacturers , a set  of  bulletins  that  are  intended 
to  serve  as  a guide  to  those  ’.ivho  are  contemplating  Inaugurating  the  open  price 
plan.^ 

Enterprising  men  who  have  picked  up  the  r:idiments  of  the  plan  either 
from  Mr.  Eddy  himself,  or  from  his  writings,  have  organized  secretarial  service 
bureaus.  These  are  so  organized  that  they  can  take  over  the  operation  of  several 
open  price  associations  and  run  them  simnltaneously.  Secretaries  of  these  bur- 
eaus are  constantly  on  the  watch  for  opportunities  to  organize  manufacturers  in- 
to open  price  associations  and  are  proving  a strong  factor  in  their  development. 
Some  of  them  operate  as  many  as  a dozen  associations.^  The  result  of  the  publi- 
city given  to  the  movement  through  the  instrumentality  of  these  various  factors, 
is  becoming  increasingly  apparent.  There  is  hardly  a trade  secretary  that  does 
not  know  something  of  the  workings  of  the  plan  and  a surprising  n-omber  of  busi- 
ness men  are  acquainted  with  it. 


Gaunt,  T?".  H.  Open  "^r^'ce  Plan, Woolens  and  Worsteds,  Textile  World  Journal 
April  8,  1916,  p.  1709. 

2. 

Babson's  Reports  on  Cooperation,  Wei les ley  Hills , 1915. 

3 " * 

•For  instance,  Organization  Service  Corporation,  New  York  City;  A.  A.  Ainsworth 

New  York  City. 


, rr  JK  *' 


•z  t rv  nt 


'iAk  * *'  ■- 

,Vo?['  t#OTrt»  ^ i.'  r- i a*«f  a '|jfl.V6^*«5  ttT' 

nm^'  tjf-'  ' .mH  ‘fcaa 

• ■■'  . . ••'  -,  ° ' 

‘ <*j  ' I 

C’Di'fff  r»qtf  e/£J  ‘**a/r »ftixrsr*  Mi  .Pt^***'  oH 
I'tMlq  1^3  «|f?  orti'  ^ 

- * ' oV- ' .» 

#tifr*r0(»  tiefStiSts^cs  sr.iH  tltf  jBc^Vi  to  ,1X*«rJel  aotl^ 

fjrr.  r*V«  Vs  aoi?«tw  «f?  irovo  <aC»4  rtip  ^fiiS^««Lvsto  &•  »t»  toodT'  «=lwi>irtti.cf 

■f  ^ *■  ^ : - ' *“  • 

^ ara4*  ‘"f«n  boM  hivsi.^iiibt>oii*^  mi’i'ti  tm<Tc 

hi\ 

-44*  »-?!' \a'-5?iif’^  ;i3#sa  i«3?r-A3t0  C'i  ovflj-  flD  iS^  t0»«i^ 

. ;'r^l^^^7<)^/et'.■^^  ^ tr*  t-'am 

^:d  >trptr#t  orf?'  .t«#’0X>  a m ^ifaS^  ya"«??a^  »awfi'"%r--w 

» 1:  ^ * , -'^'■■^  V "'  h - ' '" 

. -lO^ai*^  ^M4fdi  lo  -«i,r*c^4feri;3twtt  tti: 

'■  . 

TTro^-Attita  i c'nwflp  . 


^'^-i«,£*cr  tocT?arrt  '^iaH^furf^a-^ran  ’fsi.Ia'  a>i#  lo  ' j^il /fv*«i^  INJici 


,1 


I 


T!’. 


•^- Vf  ^ 


,Xijnjtfs>t  i-f no*' c-f  i^tiirT  ' fiAeifato*  too  fc’n€.f,<3o*,njH£*r '♦©•’•fj#  u/itO§^  ,.?£  .Tff^iariiiC’* 

,<?crx  \<t 


x-= 


f^to^arrf,^  ./  ,noftf5toyioO  96Hx9iS  aoiid»ft3»£:dl  ^^axdtiat  xc%‘^ 

. .^  . . <c.^-XO  lC.toti  IroW 

' ■ ' ***'  ’ ■ 


V* 


i 


25 


CHAPTEB  II 

DESCEI?TION  OF  THE  COMINATION  MD  ASSOCIATION  DEVELOPI.IEIIT 
IN  THE  I BON  AND  STEEL  INnJSTHY  AND  CO'iPARlSON  ?/ITH  THE  OPEN 
PRICE  association 

Beginning  rvith  the  combinations,  in  existence  some  twenty  years  ago 

and  closing  with  the  open  price  association,  there  is  rranifest  a more  or  less 

orderly  development  from  one  stage  of  activity  to  another.  These  stages  may 

be  named  as,  first,  the  Combinations,  second,  the  Statistical  Associations, 

third,  the  Gary  Dinners,  xo-arth,  the  Open  Price  Associations.  Each  of  these 

types  v/ill  be  discussed  and  compared  \-dth  the  open  price  type. 

The  price  fluctuating  evil  so  characteristic  of  the  iron  and  steel  in- 

austry  has  xed  iron  and  steel  producers  to  seekismedies  in  these  various  forms 

of  associated  activity.  The  combinations  exemplified  by  such  organizations 

as  the  Structural  Steel  Association,  the  Steel  Shafting  Association  and  the 

Steel  Plate  Association,  had  little  in  common  with  the  open  price  association.^ 

These  combinations  resorted  to  price  fixation,  regulation  of  outuut  and  divi- 

2 

Sion  of  business  on  a percentage  basis.  The  open  price  association  seeks  to 
put  each  conroetitor  in  possession  of  all  the  salient  facts  of  the  industry  trust- 
ing that  the  desired  objectives  will  be  attained  by  individual  independent  ac- 
tion, without  collusion  of  any  kind,  through  the  exercise  of  intelligent 
management  and  control  over  each  business  uiiit. 

Hegulation  of  output  and  allotment  of  business  are  the  other  out- 

3 

standing  features  of  the  combination.  Obviously  records  had  to  be  kept  to 
show  in  what  degree  members  were  carrying  out  their  agreement.  These  usually 
took  the  form  of  sworn  monthly  statements  of  output,  orders  talcen  and  tonnage 

r ~~ 

These  operated  from  about  1900  to  1904.  Record,  U.  S.  vs.  U.  S.  Steel  Coroor- 
ation.  Vol.  4,  p.  1413{  Vol.  2,  p.  821. 

2 

Record,  U.  S.  vs.  U.  S.  Steel  Corporation.  Vol.  4,  p.  1413;  Vol.  15,  p.  6046. 
Ibid. 


~ r?'  1 


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;.v  > '..'.*ri 


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''  i\'  ~- 

':b  L-:c^’ * .. .•'^'  ';l.- • :.-:-''r^  ,.v:  a ji  '•  ♦•:■-  *Tr{?  ..  Z.  7,rJ.-»o/:-  1j.‘: 

lytft  '•1.*'.  = ' , >_>»+  •';"  i • 

i ' Li. •*».*’'  :B  •:  ■ ^ ■ 

- ■'  i "C.  . . •.■.*;  iT-.-f.c  ' -r.L.  •tr-’O  •»• 

,;  '■  J , l-.r  •,._.  , J '.  T. •■■.,:■'•■  0.1  C'-’  jStfJ 


o uV‘  Gr^~rr?' 


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Cf: 


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to . >t 


3«-  ■..■  .•'*T  *.w.  ii'O.:  • ' -■•  i ba.'  . _i 


LL'.-'C  V 


'.  « 0 -“  ^ <■.  <>> 


; .li  V 


J t ■ ‘Li  r . ■'  ‘ ■ 


. . ' ^rltog  ■.,  . ivOct:-  "Ta 


■■■it  j<r  ■■■ 

■f. 


. ■'  ' ' ' 

: A<  '■  I' 


, • "“OLi  : •■■>•'’ :•  u o?  L.yiC'-  »^  */, 


Til 


’.1 


4 ' . ^ 


■ij  to  t.  ? . 1 


• .’riiicf  i'A,,...''":  ■'t'Lv  .Li' ^i’-'  ■'.'  to  ffoifi 

I:i  to"' ■•.--•  if  at  ■•..'•  '•■.  .:!  •?  , ;: 


.AoSi'e 


?n- ; . I',  ;,  i ‘t  J i/i 


. li  'ir'Sisi  'td  IZlxi  ,l-£  • A"  V 

.',v  f ■■;  ^ -•  00  ' 

. ' < •■  V.'  ' •.  aCm,-  .iVv7  r'!>7. 

A*:‘  ; rvi  ' ' 


'.-ii  ?n:' 


4-  •*■  ».■  ■»  I 


( j . K 


u/-  or;  *.  iuAiiA?-- 


■-  ^•■■^  ' 


•-  x t<i3* 


f i 


•:•■  *1  • ■ -"f  . 


• • . f ' • ■•>  •'* 


.'.-^0;^+^ -iro-'  . .r  , t.  ;f)  irr  - >:.•.' 


■ ' ' :. 

.^r  r ^ .,  . ^ N 

.-•»  .■  r ?■  n r 


. -V  .r:‘l^£bo^c'- 


Jl.' 


f" 


vr-  rr  A' 


26 


shipped*  In  the  majority  of  casesi  the  price  "being  fixed,  no  pur'oso  was 

served  in  requiring  a report  of  prices.  Penalties  were  provided  for  those 

who  exceeded  their  percentage  of  allotted  business.  Those  who  exceeded  the 

output  agreed  upon,  were  taxed  a certain  amount,  based  on  a charge  per  ton  or 

per  hundred  pounds  on  the  amount  of  the  excess.  Those  who  fall  short  of 

shipping  their  allotted  percentage,*  were  credited  with  a corresponding  amount 

based  on  the  ainount  that  had  been  shipped  less  than  the  allotted  percentage. 

Tne  commissioner  after  ma,-cing  these  calculations  would  send  the  comoiled 

1 

reports  to  each  member. 

It  may  be  noted  that  the  exaction  of  penalties,  thought  so  neces- 
sary in  those  days  when  so  little  confidence  prevailed  among  coapetitors, 
is  entirely  out  of  harmony  with  the  philosophy  of  the  open  price  plan,  which 
has  for  its  aim,  the  upbuilding  of  a Sx^irit  of  confidence  and  trust  among 
competitors. 

The  reporting  system  in  use  among  combinations  may  have  given  Mr. 
Eddy  a clue  which  led  him  to  develop  the  reporting  system  that  he  did  in 
the  open  price  association.  The  combination  reporting  scheme,  although 
narrow  in  scope,  resembled  somewhat  that  in  vogue  in  the  open  price  associa- 
tion. The  comoination  system  called  for  reports  of  production,  orders  and 
shipments;  so  does  the  open  price  system.  The  commissioner  coiipiled  and 

disseminated  these  statistics;  so  does  the  secretary  of  an  open  price  as- 
3 

sociation.  The  form  in  which  the  statistics  were  compiled  were  of  course 
not  identical  with  foms  in  use  by  open  price  associations  because  the  ob- 
jocus  have  not  been  similar.  The  object  of  the  members  of  the  combination 


Testimony,  W.  C.  Temple,  Record,  Vol.  15,  p.  6032. 

2 

Reporting  Planj  Amo ri can  Hardwood  I-Ifrs.  ' Assn.  Record,  American  Col.  & 
LumberCo.  vs.  U.  S.  Vol.  1,  p.  86 


■a 


it 


Jll  In  ^ 

n-  CiltTv  criii^l. 


--V 


t-  -f-:  ) . . -.'i 

*1*. 


- J 


’•'  .i’CiT/.c-  'io  V.? :.’  ■t'j  : T . ' l-ic 

I' f’  t ;-■  :i*  r /:il  ^ ; ■ I 

/rill.'-'  ic‘' .1 .. of/ •,  :ij  a^j?? :*!::£ 0^:4  •'i'.'d:i  i:'4^6^5S» 
xfc  ,iactri  r;J>.7*rc^  *.  ^'iinr  ^flcqci  •'  :‘uc:^JjV 

- - • I ^ ''  ■ ; y ' .. •. 

-’t'l!  Oi;*  to' jvrfr  aQ"ai,-rr-Oi  ^'ar.V-taff  ‘••r 

V ••  .•  ‘ "'  - 


be,"iX^'^o  «*rovi 


T . ■• 


. ’• ; *;  l)'-s:or£  : 

\ ' 'S- 

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' r:.  Ij  -ApriT’X-^  rjf'c’  '♦ 


• i , [ ' 


O'; 


«rrj;  'I -.lic  'fc,.v'.  -/ti  -l  x-r  - : 

as*#' c .•  r?*jo'  ": 

r‘  • ♦ 


. n-  <•:'.  ' / ira 


m.  ^ ^ AMM 


•*.  .*;  iT  \r 


‘ ..-it.  ai:’:rl  \'4i  rerf-*  es  :.i  xt.  . 

: fO:  ' .''‘‘i.  'O  ' T,  -.1..  .1 

o Vv  r '■iT.'  ^ }J£  ts  I *.qI  i£:l 

' f'QiT  r;^  ‘ 4%  '.if» 

^ ^ ■ ',  ' • 

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?aoA<L  : / *t. 


. .'■■  r.wo  ■ wv  .-.  * .-•v.i'  ?'■;  .*  : ii  I.  • .tcj^L.  r.i 

' i,‘.  •^■;-  io  ta".  ; ,-ii.  ^ ^ , rx-io - - ; ■.-: 

•‘..  •'.  i-.V*  M-  • ; -■j.'aqiifi 

17  ’•■  rilis.c  fc  ii. 

■-17  . ..u‘.  _,-cr-  -'■7_  'ft  ti-ciJ.  .1  i cnct  . _ . 

; . - td  ! l:._  ■ / '- . H0a  iJtJ*  < ■'•'•  *“  ' ' ^ 


. ♦ » 


C 7 *>; 


' j:»o  ixt. 


:o 


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; Jaa* 


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27 


was  to  regulate  business  by  nieans  of  collusion  in  controlling  output  and 
dividing  business.  Such  statenients  as  were  tabulated  and  disseminated  were, 
therefore,  intended  to  show  the  members  how  closely  they  were  conforming  to 
the  provisions  of  their  agreement.  The  object  of  the  open  price  association 
being  to  educate  members  in  all  conditions  pertaining  to  their  business  so 
that  they  may  oairpete  intelligently,  such  compiled  reports  as  are  dissemi- 
nated are  intended  to  enlighten  each  member  with  reference  to  his  relative 
position  as  regards  volume  of  production,  orders  and  shipments,  et  cetera. 

The  foregoing  maJces  it  clear  that  the  combination  and  t he  open  price  associa- 
tion have  no  essential  f eatures  in  common  except  a certain  resemblance  in  the 
manner  of  reporting  statistics  of  production,  orders  and  shipments. 

It  has  been  noted  chs-t  the  ultimate  object  of  combination  and  open 
price  association  activity  has  been  to  stabilize  conditions.  It  is  perhaps 
worth  while  to  note  in  passing  taat  their  immediate  objects  also  seem  to 
have  been  identical.  The  object  apparently  has  been  to  combat  the  efforts 
put  forth  by  buyers  to  "beat  down”  prices  by  misrepresenting  prices  actually 
current  among  competitors.  This  has  been  one  of  the  most  prominent  liamediate 
objectives  of  the  open  price  association.  The  practice  also  seems  to  have 
prompted  plate  and  structural  steel  producers  to  orgaaize  the  structural  and 
plate  pools  in  1900.  Note  the  testimony  of  the  corcmissionert 

"Prior  to  1897  there  were  disastrous  times  in  the  steel  industry. 
Maivofacturers  of  structural  and  its  sister  product,  plate,  which  enters  large- 
ly into  structuraj.,  had  oeen  fooled  so  oftenand  so  coirpletely  by  some  of  the 
oiggest  buyers  of  structural  material  in  the  market  that  apparently  there  was 
alv^ays  somebody  wno  was  ready  to  quote  twenty  or  twenty-five  per  cent  below 
the  coat  to  produce  the  mar-ufactured  st-ff,  judging  from  the  quotations  that 
buyers  would  bring  to  the  marrafacturers.  Finally  two  or  three  iranufacturers 


■ - . - .-"i  shiet  :*r C4*» 

V :../f..;;  : :i5>  ilt..:.r:.,  . . . v ajcllivii: 

- ' • ■ ■•■  fV'i-,  V.  ••srf^  \/.:-t'''c  rofl  -'u.-i.-  ^{.  .t?^i  ,e*^ol®rnn£j 

.-..oi:;  oil.  . ...;J  '!-■  ■»:  ■.  ■ tS~  . ' * :.r.Cr»jf *1* ' 

■ r-4.  ’;''"  -.-J-bsC^  ' t ,iT,’  J-;  ,•5:.'  ITt  ;.■.  , ^ C?  jftlt  . 


*>■ 

» §?*icKi  •;  ieJh-aoo  ,v' ••'  : u v;,  4 


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S vi 

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. 

. ; 11.  f 

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, »•  s-c  I 

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• 

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‘ ■ '.7  I.  -■  ‘Vdj  'll  X/.i  - c'Jvw  'hi'  ' ICS”  ?*«*; 


' •T'f''-  ;rrv::J&  ; V4. 


^r-r:  0?  ■*;.'■  Jf|i“ 

. .;: ':  s t //{,  , : t" cx‘'i  C’ht  r t"*'  c . ■;  • 3 1 Oi,  t-d  J *i 

i 

.■1  'f 


1 


28 


got  together  and  swapped  notes  and  found  to  their  surprise  that  each  of  them 
had  been  quoting  prices,  five,  six  and  seven  dollars  a ton  less  than  they  had 
ever  quoted  to  anybody,  and  they  awoke  to  the  fact  that  they  had  probably  been 
lied  to. " 

TThen,  however,  it  came  to  the  point  of  determining  upon  a remedy  the 
methods  chosen  proved  to  be  at  opposite  poles  from  each  other.  The  open 
price  plan  ains  to  meet  a situation  of  this  kind  by  providing  for  the  ex~ 
change  of  inforimtion  between  competitors.  Knowing  all  the  facts,  the  con” 
tention  is,  that  they  will  then  not  be  deceived  into  meeting  a price  that  is 
purely  fictitious.  Ikch  competitor  is  left  free  to  name  his  own  orice,  but 
he  is  now  in  a position  to  do  so  intelligently.  Tiie  organizers  of  these  pools 
attempted  to  meet  the  situation  by  fixing  a minimum  price  to  which  all  agreed 
to  adhere,  peaking  of  the  action  taken  by  the  organizers  of  these  pools, 
the  commissioner  v/ent  on  to  say: 

“They  called  for  a meeting  among  a large  number  of  them  and  they 

found  that  the  only  way  to  block  that  thing  was  for  them  to  get  together  and 

agree  on  a price  and  tell  eacn  other  the  honest  truth  as  to  what  'orices  they 
3 

were  quoting." 

With  the  decade  beginning  1900,  the  Government  began  vigorously  to 
enforce  the  Sherman  Act.  In  view  of  this  state  of  affairs  Mr.  Gary  decided 
to  withdraw  all  subsidiaries  of  the  United  States  Steel  Corporation  from 
participation  in  pools.  This  step  was  taken  in  1904  and  led  to  the  inmediate 

4 

disruption  of  the  principal  combinations  in  the  iron  and  steel  industry. 

^Temple,  Eecord,  Vol.  15,  p.  6046. 

2^ 

See  Jay.  Eecord,  Vol.  20,  p.  7971. 

3. 

Temple,  Eecord,  Vol.  15,  p.  6046. 
temple,  W.  C.  Eeoord,  Vol.  15,  p.  6034-5. 


J.  . 


.r>  r.: 


iuie  a>'?.Jr:  .-o'  i/  s'' itv  -v- ^4 •>-;:>•! 


^ * ' ' c*  ^ ^ 

- 9 . C*  ?.  .4  4 # ' •’ W 


t'j 


r '. "■■  fe  ji.:’.  ..--.  i:  ^-riforrf  rsisf  hsf; 


/ .Ti/.;f  :*;^1  '!  -i,'-  ' *‘■'■'0?/  \VHi'  L •JO^T'^r 


■•'/r  : 


■'  ■- V--  ^•■‘  *■'■  '-■  . 's^  ^/•■•.,  £ i ,'lf}V--^o:-:  ,r^c:n  ' V 


. f 


•*L^e  oyT":  r*^?;-:  :'.^o  St;  ot"  oj  c2'rof(3';Wii>fi4f' ci 


'iU^JTiT  i. 


r»?  r • liT  '■- 1- 


. ■:z.^l  '^’''1  * ['•  , TO-ti?."  ■ >:,>0  '’fi';  i,.; , nu  V;^  4:r,*1.H. • ■ 

viii-f-f’;:  -■'■  ..  ;c-vi£S)ci:  &r^  . r»yf  c,jj  -, 


i 


■»•  • •»-- . > > ••■ 


‘ji  -.O'^.trc"  /j:. '4;  ■:  . -j' • *;oi;  *rX<-".-f 

, ’>  \j'‘  V • 


: 


wi^  -v,  v3«  •:!-  bj  t r.l  ;-i»rt  *'i  - » 


#l'r■^■  j.  ,^*'^0  ...H 


n ■■  . 


r A 

•'  vv  ri.^ 


bC->  ..-A- 
V-'-‘  i*T- 


.’l:\':  *t'r4  :n’:-  it  ^..y. 

: , ■»  6 J ;.o  in  • no ' Xtsso-*- 

*>  oc/r  %.'«i /.•'.>i^;;.  ii.  - ■ : r„  ^ 'C’.3'j'' 

V*  f • 

'■»•  .•  ■ : n ■ *'.i.  'i'  '':  <.■;  o:?  'yn.”  •■:  X:  •>  Xrr,  ■ *. 


' •] 


* I *;  r.^.i  Of'  -I  ' -•;: : p ..» :• 


r-#" 


— 

i 


OUi^j.po  .•  n . ■ . •.;T,  ' V 


''4  :i.:l^ 


. ■•'  t/ii'Y:).  ic  (Ujij;  ,».-•.■*  I’o  v.’v  -T  .Ai,.:;  ft.0,--.  •-'•iJ 

.5>  ’ . 


vl;i',  .’•>'•  4*’  ;.  ..;  • JX;  »?  J ;;/i  .•"  a:  X T^b  «£*•?.  ftri  7 hf'.OC'*' 

^ . .'i  o%- : ai  ac  ' : , . .f  . oJ  ' ii  iro.i:: 

• •■.•..  ■•  .' X '''i-".^  ' ■■  • i .IX!. -J rti-.'i  . -o  roJ^aiTtcli 


► ''v' 


jO,  • . , . . . . 

,'  , . 1*1  ‘T  •■ 

- t A”.  V*.  '•r  « ... 

^ • A £ t JbW  ^ ' I *J  / I 


:,T.  «c^' 


,o. 


mt 


29 


They  were  replaced  by  the  so-called  Scatistical  Associations.  The 
members  formerly  associated  in  the  combination  sic^ily  changed  the  nature  of 
their  activities  so  that  they  might  appear  less  offensive.  With  this  stage 
of  association  activity,  it  becomes  easier  to  discern  resemblances  to  the  open 
price  form  of  activity. 

Members  have  now  made  considerable  headway  toward  becoming  freer 

agents.  Business  is  no  longer  apportioned  nor  production  regulated  by  means 

0*  as^eement.  Penalties  are  no  longer  exacted.  There  are  no  agreements  in 

writing.  Members  are  no  longer  required  to  submit  affidavits  with  their 

reports.  Voting  at  meetings  to  determine  how  members  shall  conduct  their 

1 

business  operations  is  abandoned.  Members  continue  to  malce  renorts  every 

2 

month  of  their  jp reduction,  orders,  and  shipments,  but  the  purpose  in  doing 

so  is  no  lohger  that  of  determining  what  penalties  or  credits  may  be  due  mem* 

bers  for  exceeding  or  falling  short  of  allotted  quotas  but  to  keep  members 

informed  as  to  whether  they  were  maintaining  the  same  relative  position  in 

3 

the  industry  that  they  had  previously  occupied.  It  is  probably  fair  to 
assume  that  moral  obligation  to  abide  by  the  percentages  approximating  those 
which  were  enforced  ly  the  combination  had  now  supplanted  hard  and  fast  agree- 
ments backed  up  by  a money  penalty. 

Whether  at  meetings  members  made  declaration  of  purposes  respect- 
ing their  production  policy  is  not  made  clear,  but  it  is  clear  that  each 
member  made  an  announcement  of  prices  whichhe  expected  to  charge  and  that  as 
a result  of  their  deliberations  each  member  would  announce  a price  identical 

with  that  of  every  other  member.  Furthermore,  it  was  generally  understood 

4 

that  the  price  announced  was  to  hold  until  the  next  meeting.  Evidently  strong 

^‘Langan,  Record,  Vol.  2,  p.  839-342;  King,  Record,  Vol.  6,  p.  2083 
’Ibid,  p.  839 

^•Temple,  Record,  Vol.  15,  p.  6037. 

Record.  Vol.  6.  u.  2083  


1 


‘ ( 'W?  X3  tfltio-X.y.  0 ' »'ity,» 

t-aJ  £•„  . • ■•.  yii  !»b jf. ; c ir;?  ^ 41  as;' ^’4.-5 


|4 


fe.  j;  io  oEiaJ  •;  '<: 


i .■*  >.  c*  - * 'vVj  1 .i  -ho  < -yi  6*:  9 rc  o w 


‘-'--V* ; Cij 


'r  .tcfCi 


■*  ;j  , .'i..  X^c>i : ‘ 

.,  ■ J ■' 

. i'  X."0*  *:  '■  -r;.: ; sci' 


-*■  ^ ^ V ■' 

.\i  s n- '-'ij'j 


r?r  c.vTM.-:'»'f  t ■ owat' 

' '}  - j''"*'':  . i-.jojy'jv');..' ^r.  -;vy-;-f."^X  Oil  wt  '«  R^'V,  * 

-'U-.*'  •, -'  -w-  c.-T-ori  erlilJsjsz---.-  . ..  ■•"■f'f's 

“j  • •'  -'X-  ''Ml-  _ jC'-a:  • tu'ii -• 

-■•  '•"  ■■■  • '‘4  '■>,♦  4.:.  ,:iC30  .7',  3:  ’ 1 

• ^ ‘ 'v-  ■ 

■ .•  ? oXT  ,''-::::.  ?■'  ’ye?:'  .7  r,o...rt#':r  -it  aroJUfi  -?o  »s»i  ? . 


•lierfi  /r>"  ■: 

^ fn  -V  • , 

.-<i  a-  ■ r 


'tf* 


^ ' • u»  - J 


«-v. 


.' * w :-r’  - r'  ’--  ■ ^".0 

■•  'T  - 

5 vAii\...  ft  * :■•  ’ic  -ao-Syltti  r-rr  i.i' 

■■  ■ * ■*  * 'it  -a  ' :,  -t-wro  ‘•j'i 

■ <j.  ..  ,-•■ 

'..i.  *'  It'C.  ..  . ."  V.Oi*.  1 .-;■. 


.L  -Xoo-:  ■ ti^ 


■■  •! 


’.p.-t  yrfi;?  , .■?  'O 

M.'£_.5j  r-r.  £• 

' 'rr.; -tM'  ' ...:v,xa  tfrcvrfpirJ'R 


^'u;SC  Vois.  ' . 


crx 


.'irf  0 $h 


:i/o:r  flai. ' .■  '..v  ^ 


J :.  .»r-J 


. 1 i '*  1 . I. 


'3W<  Ola  r ■ ..  ""  x,  .-  •jOc.'.^:-'? 

? ri._7i.3i  * /-r-.  D t4‘/ . v '.'..^v  lu  ■*  ' 

*r  - v ’ , •:  ' rdiO  np-'V'-’  • .%*•.•  1 .•.,. 


V ' f ilost  of  £oc..7t-’ 


, ' *1  • O-'.'t 


.IcV  , . If;  ..■■•? -1 


30 

forces  were  in  operation,  even  under  the  Statistical  fonn  of  association,  to 
prevent  freedom  of  action. 

Members  of  open  price  associations  are  free  agents.  It  is  quite 

clear  that  members  of  these  statistical  associations  were  not  free  agents.  Hov/* 

ever  we  have  seen  that  considerable  progress to^^vard  freedom  frcaa  restraints 

was  made  under  the  statistical  form  of  association. 

Owing  to  the  strong  condition  of  the  market  for  iron  and  steel  in 

the  summer  of  1907,  interest  in  the  statistical  associations  practically 

ceased  and  this  foim  of  association  passed  out  of  existence.  The  financial 

crisis  very  soon  foliovved.  Fearing  that  the  demoralization  spread  by  the  panic 

of  1907  would  also  envelope  the  iron  and  s teel  industry  unless  steps  were  im-= 

mediately  taken  to  head  it  off,  Mr.  Gary  invited  the  leading  iron  and  steel 

producers  to  a dinner,  the  purpose  being  to  talk  over  tlie  situation  with  a 

2 

view  of  determining  what  might  be  done  to  avert  disaster.  This  ms  the 
emergency  that  brought  the  Gary  dinner  system  into  being.  The  system  proved 
somewhat  successful  in  stabilizing  conditions.  Therefore  it  was  retained 
after  the  period  of  the  emergency  had  passed.  For  a short  period  (1909-1910) 
tne  system  temporarily  broke  dom,  only  to  be  resumed  again  at  the  expiration 
of  that  period  underthe  auspices  of  the  American  Iron  and  Steel  Institute. 

The  system  remained  in  operation  until  in  1911  when  the  Government  brought 
suit  against  the  United  States  Steel  Coiporation;  whereupon  it  was  abandoned. 

The  advent  of  the  Gary  dinners  marics  the  beginning  of  another  stage 
of  association  development.  In  connection  '^th  the  Gary  dinners  Mr.  Gary 
introduced  t\"0  new  concepts  which  Mr.  Eddy  was  to  seize  upon  and  make  the 

r,  ^ ^ 

^ Hobinson,  M.  H.  Unpublished  f^nuscript.  Informal  Combinations,  p.  37. 

Ibid,  Gary  Dinner  System,  p.  2. 

3.^, 

Ibid,  see  pp.  26,  28,  41. 


/!•..  J.. 


Cju  ■ 


- ^-1 

;'-.,:i.  .o  I': 


'ui 


rj*C!  *' 


-Ti-:  fc...  fc.v'ir  iti  rj  r;  ':  :tt:’:'i'  \n  t-'^- 

■ 

* ,-  ' * ^ ■ * * Jl  Jl  4- 

'v'  4 . V ,^.  id«  >. 


• ^s.  r ' *3*  i' 
. . KV  1-\ 


Si 


h . 


*.  • 4 


* **  ^ ii*  ».'  *ii  ‘ * ?.>s  C . Ji-C: 

' - — . ■ * ^ 

;.j  *»d9  f f/I : . -J,  o'! 'j:  :■’•  ■. .' . 


i ? 


< d\ : i'©. 

^ > t • 
■ * '•■  * 

X » '.  > 

•'  '.■ 

■ ■.  -Jit;,. 


t;. 


..A.  . ' • . 

' T V 

r.-Ji.;.  icn' 


-i,.;  •■  ’j.^  “■  ■/  i 

.i'-K*  ‘ I r.J  's-.i.  '* 


r ■•  tx'ix.s. 


, j i.  .t : 


r - A 


■ ?;  .;ri  ’■  '*  • ’’  •.  ' . .'  . rrc- ' •*.-..•(  vij*’'  , . T.c.5r^ 

•*'•>'  't : • . * •■  '%;.  ; ;.;•  ••■••■•  vt 

* ■-  '.■  ,.  .**  c ■'-4 > );  •;■  4 .ij-  %%■'  " ■'  f ■ ,'  ' . 

.•jif!  ; i '■  Ijv  11  nu  ..•’jfj,.'5-'‘.  *.  *TTL  ' 

\ roq  t.'trv4  >'j  V 4 . .i>\r  ;..  j'  : ■.■ 

'•  ■ - 


very  fomdaticn  stones  for  his  systeiii  of  cooperative  con^petition.  He  con- 
ceived the  idea,  first  that  systeiaatic  attenpts  sho-ald  be  made  to  bnild  np 
a spirit  of  cooperation  between  competitors.  Cooperation  in  Vasiness  wculd  fol- 
low if  a friendly  feeling  coald  be  developed  betv/een  competitors.  A feeling 
of  friendship  could  best  be  developed  by  arranging  for  frepaent  gatherings. 

TiiO  second  thought  ;ms  that  competitors  should  be  induced  to  exchange  informa- 
urCti 

ticn  between  each  other,  freely  and  frankly.  In  the  words  of  llLr,  Gary  the  pur- 
poses served  by  the  Gary  Dinners  were  "TIjo roughly  establishing,  if  possible,  a 
friendly  feeling  amongst  the  steel  mailers,  and  of  inducing,  if  possible,  the 
manufacturers  to  state  frankly  and  freely  what  they  were  doing,  how  much 
business  theyvere  doing,  what  prices  they  were  cha-rging,  how  much  wages  they 
were  paying  their  men,  and  oftentimes  wh.a.t  their  methods  v'vere,  .and  in  fact 
furnishing  franlcly  to  the  Oohers,  all  information  concerning  their  business, 
to  maintain  as  far  as  practicable  the  s tability  of  business  and  to  prevent 
oy  exnortation  the  vTide  and  sudden  fluctuation  of  prices  which  would  be  injuri- 

1 

ous  to  everyone  interested  in  the  business  of  the  iron  and  steel  manufacturers*’’ 
Ifr.  Gary  well  recognized  that  in  order  to  make  effective  his  ideas 
of  building  up,  first,  the  cooperative  spirit;  second,  a sentiment  of  mutual 
helpfulness  to  be  manifested  in  a free  and  frank  exchange  of  infomation,  it 
would  oe  necessary  to  do  more  than  provide  for  an  occasional  dinner.  The 
size  ox  the  industry  would  not  permit  of  more  tlian  the  leaders  of  eacli  line 
of  trade  being  present  at  these  dinners.  It  was  imperative  that  each  line 
of  product  be  organised  in  such  fashion  as  to  provide  for  the  frequent  ex- 

2 

change  of  Information  a:.il  the  grov;th  of  friendly  feeling  among  competitors. 

^’Gary,  Record,  Vol.  12,  p.  4839. 

2. 

See  Robinson,  II.  H.  Unpublished  lianuscript,  Gary  Dinners,  p.5 


. -*' 

V . 


V * •■ 


_f  ' 2. 


•.  .'-l-'..v-  ::i  • : . •'r  ' I ’0vao6 

~ _*wP 

. \T  4.  ;4MV.«^J3bi  V . -.1 

..  •n^s-'T  "Ol  '^.A^...  • 

.'j  f'i  I ;rv.>  <(‘.  • /j:.)^.;.,. 


^>j3  I:  « 


.:--‘h  wo: 


-I  r:o  ^U.i?.:d>:: 


a:? :jt  * c;  ..  • 

U;J  ’.  ' r .--';r  ,•'  .: 

: AOc  : ; , --■  - ■ X'  ■■ 

^'-  ' • ” , . A.  9^'  “ v;  •;  ::jA 

; t ..;  O' 

row":  .t  t f 


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i X..-L.  ’;:i  -.i  , . <t'o46*t  :■  ■<  M 

'i  - 2 ^ b * V «7  ,*r 


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.’.  -•  - !.,' 

, ■ — ,,  •;,.  ..  r::-- 

' .'  r ' T*i  ,J  ; -» 

* i -. : ^i::'.'^.-  *.C/tr 

,.  ■ ’ A^r;  I 2 to  : 


' liJlIoV . 

*:  f 


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i > « , ? ■ 


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- • :X^n 

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"r-  ir 

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t • V*  4 * t*---  - - - 

.1  . -i-  J-.'lai'! 

'Tnrzo±r.H  '. 

4 b. 


. t . .V;-. 

. - ■ ■-3'^ 

. 2 , , 4 tiftifcJHi 


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ii£iy  05-  t; ! v,c- 

fiis  CM' • - 

J-  STi^i  •'.  ■ . . . .s: 


'Itk. 


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-.moto  V:  r-  . * -ji 


H»9i. . *r  . 


32 


The  method  devised  was  to  appoint  a general  comiTiittee  of  five  who  were  clothed 
v/ith  authority  to  select  a number  of  subcommittees  to  represent  the  important 
branches  of  the  iron  cCid  s tsel  industry.  This  action  was  voted  at  the  first 
Gary  dinner.  The  sub- commit  tees  voted  in,  represented  the  follovd.ng  lines  ;of 
products,  ore  ana  pig  iron;  rails  and  billets;  structural  miaterials;  plates; 
steel  bars;  pipes  and  tuo-olar  goods;  sheets  and  plates;  v/ire  products. 

The  general  comniittee  was  of  value  in  coordinating  the  work  of  and 

stimulating  to  action  the  memoers  of  the  several  sub-committees.  The  latter 

, 2 

may  be  regai-ded  as  the  successors  of  the  so-called  S:atistical  Associations. 

iheir  program,  however,  was  a larger  one.  Thej^’  were  coranitted  to  the  addition- 
al tasK,  first,  of  ouilding  up  an  esprit  de  eexps  among  competitors  making 
for  cooperation;  second,  of  oroadening  the  sphere  of  cooperative  activity  in 
tne  direction  ox  a more  frank,  free  and  comprehensive  exchange  of  business 
information.  The  way  was  rapidly  being  prepared  for  the  advent  of  the  open 
price  stage  of  development. 

!.lr.  Gary  not  only  pointed  the -way  by  preadhing  cooperation  and 
by  creating  the  organization  by  which  it  mi:-):it  be  translated  into  action,  but 
as  the  President  of  the  United  States  Steel  Corporation,  he  tremendously 

aoetted  the  movement  by  practicing  what  he  preached,  as  the  folloT^ving  will 
indicate : 

-Ir.  Smith,  has  the  existence  of  the  United  States  Steel  Cor- 
poration had  any  effect,  good  or  bad,  upon  your  business?  A.  Before  the  for- 
mation of  the  Steel  Corporation  business  ethics  I mi-ght  say  w^ere  in  very 
bad  shape,  corrpstitors  had  no  confidence  in  each  other;  they  resorted  to  sub- 

Ibid.,  pp.  6,7. 

2. 

Ibid.,  p.  7. 


33 


terf-agas,  misrepresentations  and  false  statements.  The  same  lack  of  confidence 
3xist3d  iDst^veen  sellers  and  raany  purd-iasing  agents.  It  \vns  a very  -andssir- 
aoxG  condition  in  vvhicn  to  do  business.  For  the  past  seven  or  ten  yeai’s-- 
in  later  times,  at  any  rate — all  of  that  misunderstanding  or  misgiving  has 
been  replaced  by  manly,  straightfonvard  dealings. 

Qe  io  vnat  extent  ao  you.  think  the  Steel  Corporation  has  brought 
aoout  that  change?  A.  I do  not  think  it  could  have  been  brought  about 
without  their  influe  me  and  example. 

,>  i-ow  wnat  is  the  difference,  if  any.  In  the  attitude  of  com- 
petitors in  your  line  tov;ard  one  ano.her  from  .the  condition  that  prevailed 

say  fifteen  years  ago?  A.  We  are  honestly  friends  now.  Then  we  pre- 

1 

eSnied  to  oe  ii-iends,  out  were  the  bitterest  enemies. 

Just  what  the  Steel  Coiporaticn  aid  to  build  up  this  friendly 
sxJirit  is  revealed  in  Mr.  Qary*s  testimony: 

"j'e  have  keptcoirpetitors,  employes,  and  customers  well  informed 

In  regard  to  our  goiieral  business  affairs.  Of  course  I do  not  mean  to  say 

tliat  we  always  a3,lo;;3d  e^.^eryone  to  know  of  our  negotiations  concerning  contracts 

and  things  of  that  mind  th.^t  might  interfere  with  the  regularity  or  eucesss 

of  our  ousinesB  in  detail,  but  sc  far  as  cur  policies  and  principles  and 

t^eneral  conduct  anu  results  and  methods  are  concerned,  we  have  endeavored  to 

2 

keep  the  j.yublic  informed.  ” 

Although  Mr.  Gary’s  teachings  and  exarrple  had  their  ultimate  influ- 
ence, the  immediate  results  were  not  gratifying.  Very  soon  after  the  initia- 
tion of  the  Gary  system  it  became  plain  that  competitors  wore  not  wdlllng  to 
show  the  same  degree  of  frankness  and  faith-fulness  to  Mr,  Gary  in  reporting 


2. 


{Ir.lth,  C.  C.,  Eocord,  Vol.  20,  p.  8057-8058. 
Gary,  Itecord,  Vol.  12,  p.  4917. 


chan;:ies  in  their  "business  methods,  as  he  was  doing  to  them.  Testifying  on 
this  matter,  LIr.  Gary  saidt 

"We  decided  not  to  meat  and  give  ot?i3rs  information  as  to  exactly 
1 

•why.t  we  wore  doing,  what  our  orders  wci-a,  and  where  the^r  were,  or  any  in- 
formation a"bout  our  business.  Conditions  had  clranged.  This  step  was  forced 
upon  the  corporation.  Others  did  the  same.  ♦ + * * + yjxd.  prevented  de- 
^aoralization;  we  xiad  by  our  business  friendship  and  our  coming  close  to- 
gether and  keeping  one  another  posted,  prevented  the  wide  and  sudden  fluc- 
tuation which  I particularly  was  attempting  to  prevent.  But  there  had  been 
changes  fi'om  time  to  time  and  sales  made  below  the  advertised  price — vwrat 
are  considered  the  trade  paper  prices,  but  never-the-less  I believed  it  vxas 
good  business  and  good  morals  x,o  continue  to  furnish  the  information  which  we 
liad  been  furnishing  from  time  to  time  -ontil  we  reached  the  period  when  it 
was  perfectly  evident  thi:t  there  was  a disposition  on  the  part  of  everyone 
outside  of  ourselves  to  do  j^ast  exactly  as  he  pleased;  tliat  is,  to  pub- 
lish one  price  and  sell  at  another,  to  sell  far  below  the  ]:rlce3  that  were 
supposed  to  exist  without  notifying  us.  When  competitors  were  imaioing  radical 
cnanges  in  prices  below  their  published  prices  they  ought  ixx  fairness  to 
notify  the  rest  and  especially  to  notify  us,  because  we  were  notifying  them 
always.  They  were  not  obligated  to  do  it  except  as  two  men  who  nrofess  to 

be  friends,  or  professing  to  give  information  to  one  aiiother  as  to  what  they 

2 

were  doing,  naturally  ought  to  tell  the  trath  about  it." 

Mr.  Gary’ s announcemjent  to  his  competitors  that  he  w'ould  no  longer 

_ 

TMs  Ixa  opened  early  in  1909. 

2. 

Gary,  Eecord,  Vol.  12,  p.  4902. 


is 


K 


t - , 


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a.- 


f 


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f 


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. r a 


. ■ 


''  / 


35 


cooperate  with  them  caused,  the  temporary  aoanioimient  in  1909  of  all  associa- 
tion activity.  ITo  fr.rthsr  meetings  were  held,  and  the  committees  were  dis- 

X 

banded. 

It  is  well  to  point  out  in  this  connection  that  the  breakdO'.vn  of 
Gary's  cooperative  plan  cannot  *o«  regarded  as  an  atigury  of  the  probable  ul- 
timate fai?wure  of  the  open  price  plaii.  Under  the  open  price  plan  there  is 
no  discussion  cf  future  prices,  nor  is  any  attempt  made  on  the  part  of  mem- 
bers to  come  to  ari  under  standing,  express,  or  tacit,  respecting  the  cou.rse 
of  future  prices.  lestimcny  tahen  in  the  steel  case  imal:es  it  clear  tiuit 
iron  and  steel  producers  conceived  cooperation  to  be  synonymous  with  a united 
effort  to  maintain  prices.  In  ISOB,  Hr.  Bope  wrote  to  the  directors  of  the 
Carnegie  Comr.any  as  follows: 

"One  concern  that  has  been  reported  as  'cooperating'  r/ith  us  in 

the  price  policy  has  been  x^srsistently  atid  consistently  doing  the  other 

thing,  taking  business  at  any  kind  of  prices  they  could  get  ^ * that 

in  the  bar  end  of  our  business  we  are  meeting  competition  today  that  is  just 

xnocxlng  everything  In  the  he.ad.  The  bar  situation  is  the  w/e-akest  feature 

3 

of  the  whole  price  policy."  Testifying  as  to  what  transpired  at  the  graap 
meetings  held  under  the  auspices  of  the  vai'ious  sub-coirKdttees,  Hr.  Crav/^ 
ford  said: 

"There  v/ac.ld  be  a general  understanding  that  we  would  do  what  we 
woulc  »ji,y  v/e  would  do — ciaote  a certain  figure  until  v/e  foimd  rs.ascn  to 
cnange  it;  arid  if  we  fo'ond  reason  to  change  it  we  would  notify  cur  conmeti- 
tors,  or  talk  with  them  about  it,  when  another  meeting  wor.ld  be  held  and 
conditions  discussed. 


1. 

3. 


Bocinscn,  LI.  H.  Unpublished  Lhnuscript  Gary  Dinner  System,  p.  2S. 
I/Ir.  Bope  to  the  directors,  Hecord,  G-ov.  Exhib.  Vol.  3,  p.  52C. 


I 


“i  -Vi 


Iw  r* 


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ii 


■!  .- 


■rj:.’  • 


,r 


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ffvi  -fs- 


■ r ‘:;-v  . . . ^ • rr::  x C. 

: , ■z-.S'C:.  "lU.  il 


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■'  **J»  Oj  . b ; ?'i  . 


V.  -:rv 


■:w 


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..w 


U’C  ~ . m . 

r ' < r r;.*; 

— i**-  • - *1^1  — .. 

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n.s:  v:..‘:c_  erJlr  •- 
•-  i.  ^e-ff  ’ »•.. 


2f 


% r-  -ro  :.  ::  *? 


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S*J 


1 J 


iti  ; *.-»f  i'>.  7 2 

V ‘‘Ott. 

; ..:  (.X.^Vs 

: l-n  : * ■ c..  .rr 


? ' • 
• \ 


' ■ if  ^ -k. 

< A.  IS  w'4. 


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36 


”A  price  iVO’jJ-d  always  os  s'cigrjested.  Tlis  s'cate/rent  was  ■uuoaniroous  in 
every  case  on  the  part  of  all  that  they  would  q;j.ote  a certain  price.  The 
natter  of  price  cutting  world  os  Drought  up  and  dis  erased  and  t’lat  discuxioio 
v/oula  end  itj  hecauss  there  was  nothing  to  do  in  case  there  v/as. 

”lve  would  say,  *We  will  q;rote  a certain  price  until  we  find  reason 
to  change  it.  ’ Then  would  leave  wdth  the  sar^e  "mders tending  t’lat  sach  v/as  go- 
ing to  ssll  at  that  price.  The  affect  was  to  keep  a steady  price.  There  were 
soae  I xcct aat?-0ns.  I'ne  understanding  after  these  prices  were  announced  was 
that  there  was  amoral  obligation  to  sell  at  that  price  until  competitors  were 
no  t if  is  d.  ” 

Ths  Gary  system  failed  at  this  juncture  because  niarlcst  conditions 
led  to  more  and  more  price  cutting  on  the  part  of  those  who  felt  obliged  to 
disregard  tneir  '’moral  obligations.”  It  ceased  to  opeo’at-s  when  it  no  longer 
v/as  aole  to  control  the  price  situation,  constituting  proof  sufficient  t:iat 
members  'understood  it  to  be  a plan  for  maintaining  prices  by  joint  effort. 

In  coni/Taso  to  tnis,  prospective  members  of  open  price  associations  are  made 
to  understand  that  tne  cpjsn  price  plan' hc<.s  no  place  for  agreements  or  under- 
standings of  any  kind^  They  join  knowing  that  they  ars  e^Qseted  to  q^aote 
any  j^rioes  tn-t  they  may  see  fit  to  quote.  The  open  price  association  is 
tnerefere  not  liaole  to  be  disrupted  because  of  broken  price  understandings, 
-or  such  agreements  not  on_y  do  not  exist  but  are  positively  discountenanced. 

->eginning  in  tne  latter  pa'rt  of  19C9  Mr.  Gary  thought  the  time  rine 
to  attempt  a resunption  of  his  cooperative  activities.  The  newly  organized 
Iren  and  Steel  Instifute,  modelled  on  the  lines  of  the  British  Iron  and  Steel 

Crawford,  Hecord,  Vol.  15,  p.  1777. 

3 • 

^Constitution,  Society  of  Kicnufacturing  Oonf ecticners  and  other  constitutions 
of  open  price  assns.,  also  Eddy,  ITew  Cenwetition,  p.  122,  124. 


xiistitiite  cecame  the  r.ev:  center  of  ope rdt ions.  Plans  were  going  lor’./ard 

locking  toward  the  effective  orgcc-ication  of  the  industry  on  "cooperative 

lines"  when  in  ISll,  the  Government  launched  its  attack  upon  the  Steel  Cor- 

_^>c*^uion.  In  vie\/  of  tnxs  cxrc^.'jiis trance  it  was  deonod  "best  to  discontinue 

1 

the  coop 0 rat i /e  mcvcxont. 

This  siage  of  association  activity,  however,  was  pronrotly  succeeded 

by  the  open  price  system.  Mr.  Eddy,  Ixaving  rnade  a specialty  of  the  study  of 

lav/  as  it  pertained  to  the  vax-ious  fciaxs  of  combination  became  a close  stu- 

2 

dent  of  the  methods  pursued  by  Idr.  Gary  in  the  iron  and  steel  industry/. 

He  was  quick  to  see  the  a-.erits  of  cooperation  as  pi*eached  by  Hr.  G.,.ry  pro- 
vided it  could  ce  directed  in  such  a way  as  to  result  in  no  violation  of  t!xe 
law.  In  studying  tnis  aspect  ox  the  situation  he  conceived,  the  idea  th.xt 
there  could  oe  nothing  illegal  in  pexncitting  competitors  to  exchange  infcrtia- 
ticn  dealing  with  past  transactions.  Eis  observation  of  the  wtJrkings  of  the 
Gary  system  ccnvinocd  him  that  understandings  in  violation  of  law  inevitably 
followed  ux^on  the  heels  of  discussions  devoted  to  a consideration  of  futui’e 
iH'ices,  cut  discussions  of  prices  tlxat  were  ali’ea.dy  being  charged  or  quoted 

cot.ld  never  be  constraed  in  the  nature  of  -under standings  in  conti’avsntion  ox 

3 

tne  law,  he  thought.  Around  tixis  idea  as  a pivotal  pci-nt  he  build  up  the 
system  mxov.n  as  the  open  price  plan.  The  principal  elements  of  the  plan,  a 
reporting  syster.”,  an  open,  fxoe  ana  frank  exchaxigG  of  information  betv/een  com- 
x-ei.itOi’s  and  an  ax^oreciation  of  the  wortn  of  friendliness  between  competitors 


Jm  • 

^ Inbrnson,  M.  H.  Urr-ublished  lianuscript,  Gary  Linner  System,  p.  il. 

^ See  Edui--,  A.  J.  The  Law  of  Combinabions,  Chicago,  1901. 

J^ddy,  ITew  Competition,  p.  IIS,  lar.  Eddy  quotes  from  Bill  filed  in  case 
of  U.  S.  vs.  U.  C.  Steel  Corporation  as  follows:  " * It  is  not  here  alleged 
tnat  mei’exy  assembling  and  nrutually  exclianging.  information  and  declaration  of 
rjurj.ose  amount  to  an  agreement  or  a coiTibinaticn  in  rest'raint  of  t'orade.-’  " 

See  also  p,  121. 


38 


already  lay  at  his  aand,  coiitrihuted,  as  they  had  heen,  "by  systerr.s  of  a30ocia- 
ted  activity  that  had  gone  oefore.  It  reniained  for  Mr.  Eddy  to  iinit  them  to- 
gether, weaving  into  the  faerie  this  new  strand  of  thought  of  his,  namely,  that 
the  exenange  of  information  nmst  oe  limited  to  transactions  that  ^re  of  the 
past. 

An  exa...inauion  feff  the  list  of  open  _.i'’lce  associations  found  in  the 
appcindix  leads  one  to  feel  justified  in  aiaking  the  assuimotion  that  an  open 
price  association  is  new  in  existence  in  almost  every  line  of  product  former- 
ly contrOu.led  oy  the  suh-ccmrr.it tees  in  operation  under  the  Gary  system.  If 
this  he  true  it  is  a developirient  of  sons  significance.  Of  course  the  fact  that 
the  suhsidiarj^  companies  of  the  United  States  Steel  Corporation  are  not  mem- 
oers  of  any  of  the  open  price  associations  detracts  from  the  importance  of  the 
movement.  However,  the  rr.ethods  and  operations  of  the  Steel  Coroorations  have 
always  been  more  or  less  open  so  that  the  independents,  all  of  whom  are  mem- 
oers  of  open  price  associations,  can  prohahly  reduce  the  operations  of  the 
Steel  Corporation  to  a calculahle  basis,  thereby  offsetting,  somewhat,  the 

handicap  of  having  a corporation  as  large  as  this  ou.tside  the  ranlts  of  mem- 
bership. 

The  Ariierican  Iron  and  Steel  Institute  has  continued  to  be  the  cen- 
tral organ  of  the  industry.  I^.der  its  auspices  tw  general  meetings  are  held 
each  year  at  wnich  technical  papers  are  read  and  discussed.  The  Institute 
also  collects  the  statistics  of  tonnage  production  of  pig  iron,  steel  ingots, 
finished  rolled  iron  and  steel  products,  et  cetera.  Ho  statistics  of  prices 
are  gathered.  From  time  to  time  the  Institute  publishes  a book  knovn  as  the 
Uirectory  of  Iron  arid  Steel  T/orks  of  the  United  States  and  Canada  describing 


See  ch.  8 for  legal  discussion. 


39 


1 

the  various  iron  and  etesl  con^t'anies  and  their  plants. 


Those  vvhc  liave-  studied  the  association  movement  amiong  iron  and  steel 
producers  natvLrally  wonder  how  s-accessfully  they  are  adhering  to  those  prin- 
cij^les  of  the  open  price  system  which  dictate  that  competitive  methods  are  to 
he  free  aad  open,  untrammelled  hy  associated  action.  Having  learned  that  the 
price  fi^.ing  viras  has  oeen  ironoculated  in  years  gone  hy,  it  is  manifestly  of 
interest  to  Imacw  Itow  the  open  price  plan  is  managing  to  comhat  the  effects  of 
this  viru.s.  Tne  Eiovement  is  too  much  in  its  infancy  to  permit  of  any  exoras- 
sicns  in  elucidation  of  this  point.  Haturally,  too,  this  is  .a  iaatter  on  which 
it  is  very  difficult  to  secure  data. 


Letter  from  H.  H.  Cook,  Am.6rican  Iron  and  Steel  Institute,  Jan.  17,  1921. 


chapter  III 


THE  EDDY  THEORY  AM)  PLAN  OF  MEV/  COT>'PETITION 

Vary  little  theory  has  been  developed  in  support  of  the  open  price 
plan.  Three  of  the  most  fundamental  concepts  associated  'vith  the  plan,  n^^ely, 
firsu,  puolicity  in  the  transaction  of  business,  second,  interchange  of  busines 
infonnation  among  conpetitors,  and,  third,  the  development  of  a spirit  of  con- 
fidence and  tr>j.st  beti?,/een  sellers  themselves  and  bet^'5een  sellers  and  buyei-s, 
were  being  put  into  practice  by  Mr.  Cary  in  the  iron  and  steel  industry  several 
years  before  Mr.  Eddy  publishea  anything  on  the  sp.bject.  However  Mr.  Car;;.’’,  as 
far  as  is  Iniown,  has  contributed  no  theories  pertaining  to  the  plan. 

Only  Mr.  Eddy  appears  to  have  contributed  anything  in  the  way  of 

theory.  Su.ch  addresses  or  articles  as  others  have  published  are  practically 

without  exception  a rehash  of  the  ideas  presented  by  Mr.  Eddy.  jBut  even  the 

■.vorx  of  Ivir.  Eddy  scarcely  deserves  to  be  designated  as  a theoretical  contrlbp- 
1 

tion.  The  purpose  of  his  book,  apparently,  has  been  to  win  converts  to  his 
plan,  cy  presenting  the  plan  in  a popular  way,  calculated  to  catch  the  eye  of 
the  ordinary  business  man. 

Naturally  before  plunging  into  an  exposition  of  his  theory,  he 
undertaxes  to  denounce  the  kind  of  con^^etition  now  extant.  This  comoetition, 
tne  ’’old  coEipetition”  as  he  calls  it,  is  fierce,  brutal,  ruthless,  destructive 
and  wastef'c-l.  It  is  the  law  of  the  survival  of  the  strongest  applied  to  the 


Eddy,  A.  J. , New  Competlticn  . N.  Y.  1S12.  Mr.  Eddy  was  an  attorney!  not 
an  economist. 

Ibid,  pp.  1-37. 


.■-  .1.-  - ; 

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rr  ■ 

* . . i :r  I'.r  ^ 

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r^.  \,:  tx:/  . . 

l«i  :?4vr.i.;.In.l 

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tf  ^ ' ^ •>  .^  h-'i.  J.  . 

rc  ooiii.* 

- id  ■-  I 

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1 


4 


41 


commercial  and  industrial  relationships  of  man,  a law  by  which  the  s tronger, 
by  fair  means  or  loul,  over  come  the  weaker  in  commercial  combat.  He  decries 
the  existence  of  a competition  which  seems  only  to  foster  the  feeling  among 
business  men  that  in  order  to  be  successful  they  must  ruin  their  congpetitors. 
Fitness  does  not  seem  to  insure  survival.  To  take  just  one  example,  many  a 
contractor  who  is  rendering  satisfactory  service  finds  himself  bidding  against 
others  of  his  class  for  the  custom  of  a single  person  or  group  of  persons  act- 
ing as  a rnit.  Ignorant  of  the  terms  being  made  by  competitors,  it  becomes 
easy  for  the  individual  or  group  whose  custom  is  being  bid  for  to  play  one 
off  against  the  other  by  misrepresenting  to  each  in  turn  the  terms  which  have 
been  made  by  others.  The  result  is  that  bids  are  often  made  vMch  do  not 
cover  costs.  Inevitaoly  men  are  forced  out  of  business  whose  services 
society  needs.  They  are  Often  the  very  ones  who  are  the  most  valuable  to 
society  oecause  of  their  honesty  in  business  practices.  The  more  ■unscrupulous 
competitors  succeed  in  surviving  by  resorting  to  poor  workmanship,  ad-olteration, 
and  scin^ing  on  specifications. 

One  of  the  worst  oy-products  of  the  old  competition,  according  to 

Eddy,  is  the  secrecy  existing  between  each  competitor.^  Ignorant  of  what  his 

1 

competitors  are  doing,  ne  bids  against  his  ’’own  fears  and  necessities”.  The 
result  of  this  state  of  secrecy  together  with  the  state  of  industrial  warfare 
that  is  associated  with  it  is  to  fill  the  world  with  suspicion.  Labor  distrusts 
capital;  the  distributor  distru.sts  the  producer;  the  producers  distrust  each 
other^and  the  consumer  distrasts  them  all. 

It  is  not  necessary  to  do  mors  than  call  attention  to  the  line  of 
thought  that  jiddy  has  here  pursued.  For  a long  time  economdsts  have  been 


1. 


Eddy,  New  Competition,  p,  82. 


X# 

r'  “ic  - . • A. 

y.  ,'...■  *•  I4  >««I  ^ ■ ';C  3 # »*C'i 

j 'c*-.-  . w -V  •?-:•'  . i\‘n.,'a  I".:  ^ i o>  btfftt 

:i.-.h-^  iT’ . .'•.  ; . ■'. : •»». . •.  . • . . ..  L'-^-a  ir.r-i  i ! -;3i.  . _ Ji.:;- 

- , ■■ 

ii''..is- -. c • ■:**.„  -’d  r^«j0  J to'i  4Mi-  . ':  :■  t^ec’Jp 

m 

\ 

U'  -'■  ww-'j  Vi^co  e.  : “lo  ."itfOu  ^ ' 

?> 

' ' i .*  lA  3c.  »•  0'?^  1?  f -irfy  TC'^ 

r i K i..r:*y  ■'<  / rxrj  ri  oAx*  .?  •.' -\  *cfe  t '-•‘•rf'?:- 

..'V  itl'J  3rf."'.  '1  '''0  ''J  .iJ.  1.1 

■ oAr  ftTulirtf  lo  .->  • u i«fi  , . . ■.  ■si.  \ • . 

•lifmrlMr  A ^■:■.^  .V56 

otTr~  ST*^  “ . ■-*:'  ’ot-ileiTtf  r i Tii'tiJ  -.i. 

, 7.  ^ ,1  T/v, c/  t: f f V -.v*iL-t  rl  '■  • ‘ 

. ;.•  r i3  • ii.I.  rc,;  ., 

-.►j  ..: -i.-: ■•-•.' /•.  ,.*  J;  .'*t>  ->  ,»;..•  IK  *£:0 


42 

cognizant  of  the  fact  that  the  coir.petltion  that  they  have  regarded  as  ideal, 
characterized  by  an  open  uiarket,  with  ntunero'as  buyers  and  n->jnerous  sellers, 
each  conscious  of  the  bids  and  offers  of  the  others,  is  not  the  kind  of 
conpetition  that  is  actuailyfaced  by  the  business  man. 

When  the  business  man  has  attempted  to  avoid  the  disastrous  con- 
sequences of  actua,!  competitive  conditions  by  means  of  combinations,  consoli- 
dations, and  association  activities,  the  jurists  and  legistators  have  felt  it 
incumbent  upon  them  to  force  them  back  into  the  old  conditions.  This  is  a 
case  of  outright  discrimination  against  the  business  man,  contends  Mr.  Eddy. 

He  points  out  that  farmers'  organizations  to  control  the  production  and  mar- 
keting of  their  products  are  countenanced  by  the  courts  as  are  labor  unions 

2 

which  exist  chiefly  to  control  wages. 

"The  country  has  reached  the  parting  of  the  ways",  he  goes  on  to 
say.  "It  must  make  its  choice,  and  make  it  intelligently^  either  the  com- 
petitive or  cooperative  basis.  If  the  conmetitive,  then  no  class  should 
be  penoitted  to  organize  a coaperative  movement  to  get  more  for  wliat  it  lias 
to  sell;  if  the  cooperative  basis,  then  no  class  should  be  prevented  from 
organizing-  either  one  policy  or  the  other,  the  tv,ro  cannot  exist  together. 

Tne  Eian  who  argues  for  competition  must  be  consistent;  he  must  argue  against 

farmers'  cooperative  societies  and  Lhibor  unions  just  as  vehemently  as  he  argues 

3 

against  comcinations  of  dealers  and  manufacturers. " 

After  thus  pointing  out  that  "the  old  order  rnast  give  place  to  the 
new"  and  that  judicial  opinion  and  public  sentiment  is  beginning  to  shov/  signs 
of  a more  tolerant  spirit  toward  cooperative  efforts  among  business  men,  Mr. 
Eddy  is  ready  to  launch  into  an  exposition  of  what  he  tenns  the  "true  comoeti- 

Johnson,  A.  S.  Eeview  of  "New  Competition",  Pol.  Sc.  Quar. , Mar. , 1913, p.  142. 

• Eddy,  New  Competition  , See  ch.  19. 

Ibid,  p.35. 


't  . ■>;  ■ 

I ml.  ^iried 

' f 


. r:'»l  adj  ^a  ■jWatnsoo 

, ■ ^ . ' , 4 

4*T*./'“78:,  frxt>:a«tPr  to*  i^«xtn  tjKrtf*&tui  oa^V  * 

-»*  • 

*:.C.  SdijL  ficf^';  ioc  »»  .ntwa©  tnii  9lii  ^o.  etr«i-|i5wy£;  dafc« 

■»  /I 

.cas£r  «»«*c  itvtnJ  iwi;.  i!4i3^.>  x*  ti  wi  * 


• « 


t 


I 


~JS^  *owi5ftj»i^  iiJoTj!,  tt  ti/f  tn>  35k£» 

■•^rS' ' ’-^  .,  . *j 

“J-oatsoa  ,»££piirti^<i3>&o  ^o  er^^dej  at  - ~ ^^jaoar  cqmh^p^m 

' ■ i j ■ ■')!  ^ 

:1  3i'\  f^t'X  p^^shiaft  ,i*JLsiyi4't«ii  Jj^io  ^taaJSiil 

f.  > , ■ ,‘ 

4i  eis£?  •jaoi:2\^o  hls>  ^v-t*  i^<f  v«d?  o^,  imfi.s  ^locir  -tifidssfftjai 

-'  - ^ I.  -y  . 

..  - ■- 

.lU  rfifto^aoc.  .Ui’-H  twmi’LBtiC,  t>ii  iu-  JU7i»  Inda.-O'^^atas 

-•^a»  Ifrw  a |iK> ‘-rawJfSAl  ^ 

■ I ' 

»«  tA4  fc^r^.rra^^«-t>b,  6ta>  ti^yi^cjii^iyarf;-' 

s‘/5  '■  L 

■fcl  :p  Bfi  ,»*E^  6'/  i^tjsr  fr'iS" 

wi  i-daca  Jbrui,  Iorf;i  ^vMt  #1* 


^ u*  *'<■'■  0 

V tUr>i9  on  A^4f  ^ 

, ittzl  ;^i  ^ftsSr  -:<»^  war  irt  o^  ? yij#ri* 

^ T * 

Jjcal  *o*t3#^r»«  4/^.4Xe^o  <w«i5  C'.7  r<*d^  odif  Iti  ,'ii«ii  Ci} 

■ ' - I ..  - ■ 

^ , 

\ *f£y^  :oitm  mrS  ‘£i  .TtidJr  *d^  tc  -^Lklm^b 

* M ---  ' '-'^ 

'■  ta  \3mil9l^fzc  odw  tsMA\eiS!t 

t,'|  ma  ^AiJt  naoiair  loi*  X tcii*  «9i^i^c0c  67X.'jW-KC^ 

e“'’  -■,:  - ■ '■’  ■',., 

t ” .ati^j'palb.r-ujir  bts/i  »‘f<lXJd^  Tto  aaol^~“r ’dpqifto'^ 


~ult  0)  pcv;£^  ivl^  itivio  jfcJ,:  y-ito 

* j ^ 

. .--  . , \ Z 

trk'.l;.  frrui<  jkCLv:i]^04  «i  intfi:£irit»4  in*  ocX^Z^  ijttXoii'&t  ii/jJt  "ip«b 


[ 

B • . . * N • JHI 

f-  .^*“1  ,n^*  »«  It 04  !>iul*rQ9  STxiCt*  Jrt*iei%;>  artc®  a 

,!  - ■•  _ ■ -■ : ' v?  ■' 

alH 
sa 


^'#<s'iW'*d  ijjrfB  II?  cr  4'al*%‘ona-5l' oir  *X 

• ' ■ • ira  ' • .,  ; 

y 


« - »?>i  . *'  *’::^qp  ^ '.*5  . , *ntl:i  iifs^-'jXiQ  t*>  v<®  .a  mV  .ifoi  .idct  J 

' ■ , ■ X‘  ,.j{5  ,^n0ljl3r#ic?a»^  1*^1^ 

k:  -*  • ’\  . L " n .■  r-z  i>  ' - « 


.de.q 


■ i^ 


43 


tion,  " or  the  "new  competition,"  which  he  predicts  will  very  soon  supplant  the 
old  coirpetition.  "True  conpetition,  " expressed  in  his  words,  "exists  only 
where  there  are  two  or  more  coirpetitors  competiting  under  conditions  that  enahi 
each  to  know  and  fairly  judge  wnat  the  others  are  doing.  The  essence  of  com- 
petition lies  in  the  element  of  knowledge,  it  is  real,  true  and  beneficial  in 

proportion  to  its  openness  and  frankness,  its  freedom  from  secrecy  and  under- 
1 

hand  methods". 

Tnis  constitutes  a statement  of  his  theory.  In  substance  the  only 
amplification  that  he  makes  of  this  statement  is  to  point  out  what  he  thinks 
will  he  the  important  effects  of  competition  carried  on  under  open  conditions, 
all  competitors  being  possessed  of  full  knowledge.  In  the  first  place,  prices 
will  be  stabilized,  he  thinks,  and  his  main  reason  for  thinking  so,  apparently 
is  tl^t  evei*y  competitor  will  "refrain  instinctively  from  cutting  because  he 
knows  if  one  cuts  all  will"  in  as  much  as  "the  industry  has  probably  been 


through  more  than  one  disastrous  trade  war  and  is  ever  on  tho  verge  of  another 
In  the  second  place  the  absence  of  secrecy  will  eliminate  the  evils  attending 
the  old  competitive  regime.  Distrust  that  peiwades  every  class  from  producers 
to  consumers  v/ill  give  way  to  friendliness  and  trust.  Since  dealings  are  no 


n 


longer  in  secret,  they  will  not  be  attended  by  fraud  and  misrepresentation.^ 
Mr.  Eddy  thus  states  what  he  deems  '/vlll  be  the  main  effects  of  his 
theory,  out  he  doss  not  explain  why  "true  competition  exists  only  where  there 
are  two  or  more  competitors  compebiting  under  conditions  that  enable  each  to 
know  and  fairly  judge  what  the  others  are  doing".  Knowledge  is  the  essence  of 


^•Eddy,  New  Competition  p.B2 
2-  Ibid,  p.lOl 

•7 

Eor  a discussion  of  the  effect  of  open  price  activity  on  prices  see  ch.  9 
For  a discussion  of  the  advaiit  ages  of  the  open  price  pl.an  see  ch. 6. 


w to 


If 


«n*iatrtr»  tt>- ..c  XIl«r  ^ daldtf  ” ,o'oi?  wac*  14;^' td'' ”, troll 

‘ ° • , V- 

^tXro  ,Birtcfw  tUl  ^ Aoah'Waiai  • ,ool7iio<{eiFOO  *rt:^ii:oqpaos>  hie 

3.^  srrollif  rros  -roifo#  ^^xt^/tet^rteo  o'IChd  iq  ool  014  *t«t« 

•^o  ’ic  *ee>f,eB*f4  acf?  K14  (K^f<fic  ^'oiS'w  xXiri«t  £.'»  worpC  0^111)^“; 

Set  ijt/rilirfr%xi  64"^ftcTJit’  3Jt  ii?  irs-ooin  ttti  aJ  tell  aohtttc 

'^fhoa  hue  jotnl  ffsoisoonl  uX  •??“  ol 


‘ .”ei»adi«R  hfl*ji 


ijXpeQ  eat  0onai«<fxjo  at  ^x^.ottdf  ^Itt  le  InafoAl^la  « otAtnitf4^\0tr,  elrf' 

I . ' • • _ . w. , ^ 

^xi  r^ttn  fffti  Off  i 1 , Jr.-WHffjpff®  P Hfff 

ao<(0  T*I.ar  co  thtTt^c  eotstf9C2:!>t^  \o  olootlt  loittoc^al  Mia  *d  XXii? 

J - .- 

.ertitlri  o«{ff  ril  .e>!^XocftSi  JJLpl  ^ It^toa^oq  lia 

'a 

\X3*i«5V<?$i  ,<>e  ^atxall(l  leX  rw^cit  aijKJj  ir.*  «<J  llJNr 

‘ ' , X 

' 

%fd  »ik.=£:0Kr  )(><:/ffl»r-  ium’t  ai«c5o^*  / ilw  toffI.fo^^!>  xirovu 'ff4t(>  at 

■ r 

a 0^6 cS  ^Xcfiio'twq  t«ci  ♦Jiff‘S  ai  ”14^  Xio  esf?o- 11 

Z ' '-'’" 

! otfi*  lo  Bj^0v  «4i  cr?  leto  «1  J^v  \ci»  ‘ 


ulkve  Miff  JLTIa  -xo^co*  ’h'  ,«£!  0^:4^^  JLoocfiO  a^  al 

a‘i»ctfffc©'?<5[  iiffrrl  aa^itj  l^p  4fCd 

i *-a  ■«  • ' 

' oa  oic.  ocuslfi  tte  OC  orIj.XXio  iioaxTUSOC  ol 

.4.t3i4»|noii^‘r<(v":0l«  i^rjj  luarrl  MiifloJlA  atT  ffue -ffXiv/  iiK?ff  ol  iesr.r.1 

i» 

t ■', 


«ldf  yo  oloollo  alKs  aaff  e4  SI b»  ipoemh  fti(  iff'iAr  • 

p • ^ 

1 

Vjfclt  %fao  ffjolffl  Jonwoc  •oil”  vtSr  itijbCvato  ;foa  irs6«»li{c4  Ird  . ,xi-ooc{|,(, 

■’t  a 1^* 

aXd^Aaa  ffW(  ’ aaoitlXaco  7oJ5cor  J^Riallpo^aoo  tie.'tl^o^BiC'O  sioc^to  owl  a^T 

. iV 

lo  ftoet«fc»  irfff  tl  •c0^irrt\aj  ."*.i;J[0Jt  070.  c*tadlo  orfl  5*aSo  sj^liut  aX-ri^l 


lOKL 


tw 


Sf.  v-ej?' 

■;  . . '■  ‘ 

9 .^'3  -eoc  iiio  -tfffltljjo*  -fi'tJKg  lo  ffoel^e  lo  TtQtpmxip'lb  »,  7oX 

.^.^o  f-Q*  rule  rt«>^o  etlff  lo  ftojta  isidff  Ic  acli« east  1^  4 lol 


*•’ 


!l 


44 


conrpetitiori,  he  declares,  but  he  gives  no  reasons  for  so  tliinking.  After  making 
the  statement  of  his  theory  he  immediately  proceeds,  as  has  been  noted,  to 
consider  the  probable  effects  .resulting  from  the  acceptance  and  application  of  the 
theory.  This  being  accomplished,  he  is  ready  to  suggest  plans  for  putting  his 
theory  into  practice. 

Before  turning  to  a consideration  of  these  plans,  it  may  be  in  order  to 

assert  that  in  the  opinion  of  the  writer  the  statement  of  theory  as  made  by  Mr. 

Eddy  contains  in  itself  nothing  essentially  new  to  the  science  of  economics. 

Economists  have  long  recognized  that  innumerable  elements  of  friction  are  ever 

present  under  actual  competitive  conditions  to  prevent  the  law  of  supply  and 

demand  from  functioning  as  it  would  if  they  were  not  present.  Ignorance  has 

been  recognized  as  one  of  the  deterrents  to  aui  approach  to  a condition  of  free 

1,2 

competition.  In  fact,  economists,  in  foimralating  the  law  of  supply  and  demand 

which  lies  at  the  basis  of  commercial  conraetition,  have  made  the  e^jplicit  re- 

ser'/’ation  tnat  the  law  only  holds  if  it  is  assumed  that  all  parties  are  intelli- 

3 

gent  enough  to  know  their  O'wi  interest.  Obviously  they  will  not  know  their  own 
interest  if  they  are  not  acc^ainted  wdth  all  the  conditions  affecting  the 
supply  of  and  the  demand  for  the  particular  product  in  which  interest  is  center- 
ed. Ignorance  of  business  conditions  is  admittedly  so  prevalent  among  business 
men  of  the  ordinary  type  as  to  render  them  incapable  of  acting  intelligently 
in  their  o-m  interest. 

Perhaps  the  reasons  why  knowledge  is  the  essence  of  competition  may 
be  made  clear  by  the  follo^wing.  A knowledge  on  the  part  of  sellers  and  buyers 
of  their  own  interest,  implying  as  it  does,  a knowledge  of  all  conditions  that 
might  have  a bearing  on  the  supply  of,  and  the  demand  for,  a given  commodity, 

In  every  case  where  the  term  "comoetition”  is  used,  the  meaning  is” commercial 
competition”. 

2-  See  Taussig, P.W.,  Principles  of  Economics,  Vol.  1.  p.l49. 

See  Palgrave  , Dictionary  of  Political  Economy  on  ”Com-Detition",  Vol  I.  -on. 


^_sr-  / , 


. f ■* 


■Y' 


\ •y.nWdfjj.  cft  npl  ,%ji'.?-Mp  •:  o-a  act  ,f  sii!.Xii<>6 

* . ' • J 

?5  ^joff  nocKf  DA  ^fcoei^Ttrt  tle^«l£9rt®i  ad  »id  lo^  «d.? 

' ' (Ti* 

'i  ^ •]aol7^i^/i<^g•  Am  e.-^  {ooil  ^icCwfo^r?  »<C?.<i*feJttxro'. 

•is*X^  •49j«j^a  «i  »d  ,iid<(«lJtc^»o^94ft'#ai.»d  tidT 

: \M.  ■■  • ^«  , ‘•'-.  • •. 

!3Bl.  " 

cj  -tiJt-ip  cl  ftd  ,»n*Xg  attodj  i^og  eg^laC  * 

•ili  ««  TpOtelg  ^ gXtJk1>9^g«  od#  -J»^i^W  »!<f#  to  IMiciQO  -Jacf^ 

.fcisPOfroot  to  •>onti’Oi  adj  ©^  Vis';,  y^^J^cfwao  ^-cUriJoa  tXotii  k1  snA»4«oo 
•r^v*:-  irt*  noiTc^-jt  to  i^toeXa  oltf^aasttu  l Ji-ejs  ^'«**di<^^e^aot-2^ 

' •*  t:  .-f  - ■ • ‘ ' ' 

tv  wftX  Ida  .■’Devfjg  o#  Iih/7Ci  *j6fkair  inta<n^  J 

ft^c!  ^'ya.vr-y^r^l  5op  ll  ilc^tw  Si  9>n  ^imkmssii  ml  =&U&aef. 

tftfit  to  rwijii.'tjH'  a 6s  d^AtviQtjfc  fLM  «xj  nSittttie^sub  #*lg  to,  eiox4s4- aiioKooM  /naooM 

^ s^;V 

brwr^Bli  iiU  \tirytt  \o  *^S  jdS  fiaii.£jMir^<>'^  ,E^fo4-rcot 

imS5  oMi  e^^ad  ,Ac2Ai^V"«cw  l£lt9f«;ytaoo  to  tIiMkd  edg  g«.a<siX  flOltiw 

'*  ” ’ ' -^  ' 

«n*  erigT/i'l  iX<4  .♦-cjfg  ^i  il  tJ  Qtfj 

; . r ■ • - ^ E^-  - 

fPrO-T^eal  V^OCO  SOU-  liiyt  \Jfi!TQl\^  . ' &MO/|CiT, -liCrf.#  WOA3t  00  ‘,5lXt©Si ' 

l'»L  ;-■  *»  - - X ' ■?:-■■■  » 

jj»Tlocottt  MU\fiXSll>cuu  uds  Itk  ^fpij^in^oa*soa  »ta  ^adi^'^11  /^friasal* 

' '.-  ' t^  ■ ’■ 

-^ogo'50  •!  Sa>ti^ai  dul/fr  df  Ot-rlOTtc,  i^XvoJl^cr  -iii  ttct,  l>6<fao6  «4#  iw’to ‘iTocc# 

If*  jjaik-iiario  ^isnoai  sm^r9!tq  os  x-UtvS » Jsiiu  *1  txi\  i.Ulcrrco  RinnijiiAd- to  eccenoaal  J-f 

■ * ' f .1^  ^ 


ifti 


’ , - 2 

,g»ert»Xal  nffo  7lwf» 


vX.t/5*«t*TXtw-aJ  ^iSjxm  to  ftodi  ioAitbt  6^  an  »^7X^  t 

':  '%  •>% 

’ \aes  rJ9X?i?i^"ssoer  ttv  ?o2ta««^  a^g  *1  Xiir  a*x«#6t  <dt:'  >" 

l;c*  n*r#XJo*  tp.  g:;;^  Mi?  /to  o&halTtoesi.  A , x<^  Tt«»Xo  %6a©i 
fiaoijibfloo  Jtlo  to  »st«Xroff3^  * ,9aoi  9t  tje,  vri^X^isri  iXwf^  to' 

e4^  UQ  wrJhcfcfttf.B  a-Tad  3dj»i» 


,Y^t^c^^‘9  /i  ,Tot  iiVietfaL  mi^  ito  ,it?' 


..  .1  ^ 


if  '■'■ 


ji  J«i;'ii*.tr-‘ i - 'iimuts  vds  ,i>oOir-«t  yXiefTtoo**  ’stsa^/adj’  «»t8dw  oa^  jiieW  arl  *X 

-s2M.c  ,X  .loT 

x*,iT  ■ isncfkc^*^  tuf  x*oaosir  fAouixo'i  to  , ovw'xihrotr' &'«e  *^s 

X ■'  ’ '■  *'' ' . _ 


together  with  the  ability  and  willingness  to  intelligently  act  thereon,  would 

res^ilt,  according  to  the  lav/  of  supply  and  demand,  in  similar  exchanges  talcing 

place  on  similar  terms,  or  to  state  it  in  terms  of  price,  it  wo^ild  result  in 

the  naming  of  an  equilibriiun  price  "for  the  same  unit  of  the  same  qTxality  of 

1 

the  same  article  in  the  same  market".  This  stability  of  market  conditions, 
which  finds  expression  in  a single  price,  will  ensue  only  under  the  conditions 
named.  It  is  attainable  only  in  theory.  But  such  stability  can  be  approx- 
imated by  means  of  systematic  efforts  put  forth  to  eradicate  sources  of  fri- 
tion.  Undoubtedly  one  of  the  most  serious  saarces  of  friction  is  due  to  sellers 
and  buyers  lacking  adequate  knowledge. 

The  nearest  approximation  in  real  life  to  a stability  of  conditions 
such  as  is  attainable  theoretically  seems  to  have  been  achieved  in  the  case  of 
those  commodities  v/hioh  have  their  market  made  on  the  Exchanges.  The  reason 
Tondoubtedly  is  that  the  machinery  of  these  Exchanges,  be  they  sotek,  bond,  wheat, 
cofiee,  cotton  or  any  other  kind  of  Exchanges,  puts  at  the  di^osal  of  buyers 
and  sellers  an  unusual  amount  of  Information  bearing  on  competitive  conditions. 
The  higgling  between  buyers  and  sellers,  based  as  it  is,  on  a general  knowledge 
of  suDstantially  all  facts  that  have  a bearing  on  competitive  conditions,  re- 
sults in  prices  being  named  which  vary  very  little  from  each  other  for  given 
units  oi  a given  comodi ty  of  a given  <juality  on  a given  exchange  at  a given 
moment  of  time.  One  only  has  to  note  the  general  confusion  among  buyers  and 
sellers,  manifesting  itself  in  v/ide  "spreads"  of  prices,  that  occurs  in  con- 
sequence of  a temporary  cessation  of  this  exchange  machinery  to  know  the  im- 

portanceof  putting  buyers  and  sellers  in  a position  where  they  can  know  all 

2 

the  facts  of  competition  as  well  as  act  thereon. 

1. 

^ Palgravs,  Dictionary  of  Political  Economy  on  "Competition."  Vol.I,p.  376-380. 

At  the  outset  of  the  war,  when  the  New  York  Stock  Exchange  was  temoorarily 
Closed,  the  very  best  of  securities  fluctuated  violently  in  price.  As~  soon  as 
the  Stock  Exchange  opened  these  violent  fluctuations  disappeared,  and  "spreads" 
In  prices  became  less  pronounced. 


J 


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46 


It  is  a matter  of  common  observation  that  there  is  a great  variation 
in  uiie  prices  naiTiOd  for  identical  coirjirioditles  in  those  cases  where  they  do  not 
have  their  market  made  on  an  Exchange.  This  is  particularly  trae  of  tlie  great 
class  of  manufacVarered  goods.  It  is  a fair  assumption  thcvt  the  gi’eat  "suread" 
in  prices  apparent  in  most  lines  of  man'af  act-are  red  commodities  is  to  a large 
degree  the  result  of  ouyers  and  sellers  possessing  an  inadepaate  knowledge  of 
marxet  conditions.  Of  co-arse  conditions  may  arise  which  would  res-alt  in  similar 
coaacodities  selling  at  different  prices  even  though  sellers  and  huyers  are 
ohorougxily  acquainted  with  all  essential  facts  pertai'ning  to  market  conditions. 
This  cannot  os  denied;  out  the  contention  is,  that,  other  things  hei-xig  equal, 
there  will  he  less  of  a "spread”  in  prices— meani-ng  of  course,  that  ideal  con- 
ditions of  competition  are  more  nearly  approximated, -v/hen  ouyers  and  sellers  are 
well  i-nfonaed  tliaii  when  they  are  not. 

Ix  this  co'ontry  is  to  contin-ae  to  shape  its  destiny  in  a business  vj3.y 
in  accordance  with  the  theory  that  the  Ideal  philosophy  of  trade  is  coirroetition 
in  trade,  it  oecomos  inportsnt  tnat  means  be  sought  looking  toward  a freer  play 
of  conpstitive  forces.  Perhaps  the  time  v/ill  come  -when  the  theory  of  comroetition  • 
as  laid  down  by  the  economist,  now  so  maligned  in  many  quarters,  will  find  itself 
vindicated,  provided  means  can  be  fc-uid  for  eliminating  the  more  serious  causes 
of  friction  that  now  present  actual  corrpetitive  conditions  from  apxcroaching  ideii 
cojETjetitivQ  conditions.  Undoubtedly  a very  serious  amount  of  friction  ie  occa- 
sioned oy  the  lack  of  icachinerj/  for  putting  business  men  in  possession  of  the 
salient  facts  relating  to  their  particular  lines  of  industry. 

lir.  Eaay , in  the  opinion  of  the  \7riter,  shcald  be  credited  ^vith  an 
achievement  of  signal  ^x^rth  In  calling  the  attention  of  business  men  to  the  fact 
tlcat  there  is  a way  of  providing  machinery  idaich  will  enable  them  systematically 
to  get  at  the  inf  ormation  that  will  be  of  inestimable  value  to  them  in  diagnos- 


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47 


ing  market  conditions.  However  he  should  not  also  be  credited  v>/ith  developing 
a new  theory  of  competition.  The  discovery  that  knowledge  is  the  essence  of  com- 
jjst i uion,  iS|  as  previously  statea,  not  a na'v  one.  Mr.  Eddy,  however,  apparently 
thinks  tlnat  he  has  lonnd  a new  theory  of  competition,  when,  as  a rmitter  of  fact, 
econoraists  have  always  asanmed  the  existence  of  the  '<rery  thing  that  Mr.  Eddy 
wo'uld  raise  to  the  dignity  of  a theory,  namely,  that  sellers  and  buyers  possess 
enough  knowledge  of  the  facts  influencing  conmetitive  conditions  to  make  them 
alive  to  tiieir  cvrn  interest  in  their  capacity  of  bargainers. 

We  turn  now  to  consider  briefly  the  general  nature  of  the  plans  tliat 
lir.  Eddy  would  set  up  as  models  for  those  who  would  learn  how  to  achieve  trae 
competition.  From  the  standpoint  of  th.eory,  at  least,  Irrespective  of  the 
practical  difficulties  tls3,t  might  arise,  it  would  seem  essential,  that  any 
system  devised  for  the  purpose  of  securing  more  intelligence  in  ccnroetition, 
should  be  sujfficiently  con^ rehens iv a to  take  in  buyers  as  -well  as  sellers.  It 
is  assxuned  tliat  in  the  ideal  kind  of  competition,  all  -parties  are  s-^officiently 
intelligent  to  kno^;/  their  ov/n  interests.  However,  if  one  class  is  in  possession 
of  all  the  salient  facts  of  competition  and  the  other  is  not,  it  is  safe  to 
assune  that  the  (caae  ’will  have  an  undue  advantage  over  the  other  in  bargaining. 

In  other  v/ords,  true  competition  'aHI  not  pie  vail. 

In  the  statement  of  nis  theory  Llr.  Eddy  seems  to  have  the  seller 
primarily  in  mind.  He  says  that  ”true  ccirrpetition  exists  only  where  there  are 

T 

4. 

tv.’O  or  more  comuotitors.  competing  under  conditions  that  enable  each  to  know 

2 

and  fairly  judge  what  the  others  ai*e  doing.  To  have  true  competition,  it  is 


Thj.s  teim  may  ce  applied  to  purclxasers  who  are  compe^ting  against  each  other 
in  making  purchases  of  goods,  b\xt  Mr.  Eddy  undoubtedly  uses  the  term  In  its 
more  commonly  accepted  meaning  of  denoting  sellers  in  competition  with  each 
pther  for  the  custom  of  the  buyer. 

Eddy,  Hew  Competition,  p.  82, 


48 


ne  cess  ary 'Uiat-^ot  only-.sellers  "be  iiiforcied,  out  ,^lso  "Omyex’s  te  iriforr-ed. 

To  '00  sure,  Ivir.  Eddy  does  maioe  reference  to  one  in  w!bich  ■een'^'""" 

neij-o-ion  the  ’’goal  to  oe  ket^t  in  rr*ind  is  a Central  Exchange,  so  cr'-en,  so  ?uo- 
lic,  tlxat  la’cor,  employers,  customers  vdll  resort  to  it  for  information  r e- 
garding  work,  wages,  xorices  and  all  conditions  affecting  every  tr^de  and 
inditstry  represented*”  Under  tnis  plan,  apparently,  every  town  is  to  have 
its  industrial  exchange,  a place  ci  meeting  for  all  trades,  and  every  con- 
tractor in  all  lines  of  work  is  to  'ce  a mem’cer.  The  exenange  that  Hr.  Eddy 
mere  nas  in  mind  is  apparently  to  'oe  iTiainly  for  tlis  use  of  those  who  are  en- 
in  tns  various  hoilaing  ana  allied  trades.  Nothing  is  said  as  to  the 
place  u.aat  "buyers  and  sellers  of  manufactured  goods  are  to  occupy  in  these 
exonenges.  Apparently  Hr.  Eddy  has  little  faith  in  the  practica'oility -of 
this  plan  for  it  is  given  only  a passing  reference  in  a passage  leading  up 
to  the  real  plan  that  he  lias  in  mind. 

Tnis  plan  which  has  cori'e  to  'oe  Iciown  as  the  open  nrice  plan  is 
devised  almost  entirely  from  the  point  of  view  of  the  seller.  In  fact  one 
of  the  principal  inducements  for  trying  eat  the  plan,  as  T!r.  Eddy  states,  is 
to  prevent  "buyers  from  misrepresenting  prices  that  are  "being  currently 

^ w 

quoted.  He  also  suggests  that  the  plan  ’will  p."’ct  purclmser  and  seller  more 

4 

nearly  "on  a footing  of  eq-oality.  ” An  outline  of  the  steps  them  should  'oe 

5 

taken  oy  the  manufacturer  in  organizing  an  open  rice  association  is  given. 

Tne  purchaser  has  no  part  to  play  in  the  organization.  Purchasers  are  to  'oe 

jvormitted  to  attend  meetings,  hut  nothing  is  said  a'cout  pern’iitting  them  to 

2* Eddy,  Hew  Competition,  pp.  101-104. 

'For  a description  of  the  typical  Eddy  plan,  see  ch.5,  p.  71-72. 

_*Eddy,  llev/  Competition,  p.  145. 

I D i a.  I p » 145 . 

5.  _ 

ioid. , pn.  124-105. 


:.TTr«*-«as 


49 


have  a part  in  the  reporting  systenu  The  suggestion  is  Siade  that  purchasers 
orgajiize  their  o-/?n  open  price  associations,  out  ooviously  the  trade  statistics 
that  they  cou.ld  secure  for  themselves  would  he  very  limited  in  scope.  They 
could  compare  prices  paid  for  jourcliases,  hut  they  could  not  secure  statistics 
pertaining  to  stich  vital  matters  as  amount  and  character  of  production,  size, 
character  and  location  of  stocks  of  comr.odities,  et  cetera.  These  statistics 
could  he  se<rarod  only  from  the  producers  themselves.  It  is  plain  that  the 
maciiiner:'-  of  the  open  price  plan  does  not  put  all  the  facts  of  competition 
before  both  the  buyer  and  the  seller  in  the  imrpartial  \\ay  in  wxiich  it  is  done, 
for  example,  on  the  various  commodity  exchanges.  As  long  as  all  parties  con- 
cerned are  not  in  possession  of  all  the  facts  relating  to  the  competitive 
market,  exchanges  cannot  be  m^ade  on  the  terr-as  contemplated  by  the  law  of  free 
competiti  on. 


I.Ir.  Eddj'’’ s plan,  then,  failing  as  it  does,  to  provide  a system 
wnereby  both  buyers  and  sellers  may  be  put  in  possession  of  all  necessar;^ 
information  to  make  them  intelligent  bargainers,  cannot  be  regarded  as  a 
complete  solution  "co  the  problem  of  securing  full  and  free  competition  in 
the  transaction  of  business.  The  plan  is  meritorious,  ho^Tever,  in  so  far  as 
it  points  to  the  direction,  perhaps,  in  w}"iich  may  be  found  a solution.  I/Ir. 
Eady  v;as  above  all  things  a practice  minded  man,  intent  on  proposing  a 
practical  plan  which  might  give  redress  to  the  manafactui*er  who^  he  iindoubted- 
ly  ielt,  V7as  not  on  ai  epiai  footing  with  the  ‘ourchaser  in  bargaining  power. 
However  he  leaves  the  impression  '»dth  the  reader  that  his  pLui  will  achieve 
a larger  result  tnaxi  merely  to  give  redress  to  one  industrial  class.  It  is 
heralded  as  a plan  -which  vdll  lead  to  tmie  competition.  It  is  here  that  the 


writer  imst  take  issue  v.dth  Llr.  Eddy, —and  for  the  reasons  nsjned. 


1 


50 


CHAPTEH  IV 

STHJCEVHAL  FSATIJHES  OF  THE  OPE^  PMCE  ASSOCIATION 
OHGAI^IC  OFIOIM 


With  ver7  few  ©xce_:tions  the  prevalent  type  of  open  price  asaociation 

is  the  volmtary  association  tyc>e.  The  incorporated  ti^^pe  boon  ohserved  to 

1 

exist  aiaong  a few  of  the  lumber  maiivi’actxirers'  associations.  Only  one  of  these, 
riamely  the  Southern  Pine  Association  was  organized  to  do  open  pries  work;  the 


others  Iiave  made  it  an  adjunct  of  their  other  activities. 


The  oouthem  Pine  Association,  in  adopting  the  form  of  association 

tha\.  it  did  was  act'uated  chiefly  by  legal  motives.  Even  though  it  r*as  ceased  to 

ftuiction  as  an  oijen  pirlce  association,  it  is  interesting  to  recount  the  circum- 

Z 


stances  attending  the  organization  of  this  association,  because  here  record” 
eci  one  ox  one  first  atteirgjts  made  to  avoid  the  alleged  weaknesses  of  the  volun- 


tary form  of  association.  It  was  in  1314  that  this  association  came  into  exist- 
ence as  a result  of  the  reorgaiilzation  of  the  old  Yellov/  Pine  Association,  the 

latter  having  been  dissolved  and  many  members  heavily  fined  by  decree  of  the 

3 

Si^renie  court  of  Missouri  in  consequence  of  a consuiracy  to  boost  prices.  Tlie 
Oj-d  association  nad  ceen  a voluntary  one.  Its  disastrous  experience  with  the 
courxs  nade  it  clear  that  under  this  foxm  of  association  any  member  might  be 


neld  oound  by  the  acus  or  comrients,  public  or  private,  of  every  other  member. 
Under  such  circumstances  as  these  there  would  not  be  much  inducement  for  yellow 
pine  mariufacturers  to  again  join  hands  as  Hiembers  of  a voluntary’  association. 


So'o.them  Pine  Association;  West  Coast  Lumbeimens*  Association;  Califomla 
\Tiiite  & Sugar  Pins  llaiTufacturers'  Association. 

3 

Price  leportlng  was  abandoned  when  suit  was  brought  against  the  Hardwood 
Association. 

'7 

'■'American  Lumberman,  Lee.  30,  1913. 


‘ -I 


r :2^  aE^-io  ecr*'.:^:. 
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■if^' 


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» Uj  • -aC  jc^^oXttcair,*^ 

iw 


51 


Neither  was  it  likely  that  State  authorities,  particularly  those  of  Missouri, 
would  view  with  any  degree  of  equanimity  any  efforts  that  might  he  made  to 
resuscitate  the  old  form  of  organisation.  Faced  as  they  were  hy  this  two-homed 
dilemma,  the  leaders  among  the  yellow  pine  manufacturers  hit  upon  the  corporate 
form  of  organization  as  a welcome  solution  to  their  problem.  IMder  the  corporate 
form  there  would  he  no  members  from  the  legal  point  of  view.  A corporation 
would  he  organized  to  sell  information  to  subscribers  in  a manner  similar  to 
that  done  hy  Bradstreet's  or  Dun's.  Instead  of  having  members,  it  would  have 
subscribers  Mvho  would  enter  into  a contract  with  the  corporation  for  such  ser- 
vice as  the  corporation  might  be  authorized  under  its  charter  and  by-laws  to 
furnish.  Meetings  of  subscribers  would  be  held  at  various  times  and  places, 
to  makB  recoEmendations  to  the  directors,  who  would  act  upon  themi  only  if  the 
action  recommended  came  within  the  la-w.  The  subscribers  meetings  would  be  in 
effect  voluntary  organizations,  '.^ose  ^vill  and  wishes  the  corporate  directors 
would  follow  so  far  as  the  law  permitted,^ 

It  was  contended  by  counsel^  as  previously  intimated,  that  the  act 
of  one  subscriber  would  not  bind  any  other  subscriber.  Neither  would  any  act 
of  the  corporation,  - the  association  itself,  bind  the  subscriber.  Further- 
more the  legality  of  the  plan,  it  was  contended,  would  be  tested  in  advance. 

After  filing  the  articles  of  incorporation  with  the  Secretary  of  State,  they 
would  be  brought  to  the  notice  of  the  attorney  G-eneral  in  order  that  he  might 

advise  against  their  certification  if  he  found  them  in  conflict  with  the  law. 

One  other  leading  argument  in  favor  of  the  corporate  form  had  to  do  with  the 


^*See  American  Lumbermian,  Dec.  12,  1914. 

2. , 

Argument  of  Judge  Lucas  before  meeting  of  Yellow  Pine  manufacturers.  See 
American  Lumberman,  Dec.  12,  1S14. 


• '-TC 


. jiC^  ri  -:r.  sU 

'*■  - .^ -■  C^AVJ^^^  %;  -■•'■?.•-'  '•'■V  I\-  Upfn/t 

^'■'  • ■'  >f  '*■?,  rtc*^  ' lo  •'; 

■:;  / r'';-':  tj'' 

■ ' :'  ’-  , .*  •;. <-ncr'f9»r  P s^t  .' * n*  i.  .•■  ':o  \o  • 

■V'  *.•’  T*.  I ' _X  •'i.'  ■'t'  'r- ■ ' ■ Tij’O'" 


iCf  ■ - 


■ f 'T 


.'IC  . 


: c-  " oS  ftt!  •.,•;;■••  ;l ''4  .- .'  '.jf^^TnC  'ik'  - 


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f 


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' ::i/7  ID  ' Jf'eT'-  . 'zS  rc  wn*  ^ 

X->'*  J jrrJ."  ^ . ' -. -*iic  ^I;rt^  • '•  tvffig'.'iDc ^ 

w«  &■••-■  - 'I'  .■■  * • -7<»/  ;*  » X'-  ' c:  '■-^■.,■J||l  #oi' 

. ;eswC'"  Nr  ■ : N v ; - M • • •■«  *■:  ■:.  Ji  ’Xsii.  , ' * :*d/" 

'"  ■ f.’  •’•iv  ®e>  :?  ■ : .*...  ;ij  ■i'lr'iJ*;  .*:fi;;.'7'r  " ■’ ^ 

'*■  V/> 

” ^ ^ *^.r'**.  ?*X  , r : >-  * - - 

■ . ‘ '■■■■  ■ A 

•'£'•.■.  rj’"V  na.'.-i’  ,:PfirO 

"S  •»  ■ *• 

^ ‘-A  ■ 

. '*'i-  r ■ ..-p.-f  v.'^  'trv  • hr.'  V. 


cA  ' ' I /c*'  ' 


■TS 


. ..  ; « ^ioa<fef«  c.'t;.  ^ 

N.  .T-'’-  ; .;.'p  '*  '0  . >''•'■£  *•  ..,!  'Noaa*  *•'■’  - . 0:1J  '' ' 

. • .j.  L- ••'>  • ,‘  _'r-  ..  •<  ']  , • vj.  ; ';  '"-  - .:I  STQ.a 

' ’’  ■’  ^ T'--');-’  , ' ‘ Nrt  :‘rr  : rVi!!-'r 


■f-* 


Jc.-' 


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“rn  -,  » 


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i 

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y-V*  ^ 


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• ■ -■  n;  Iioa^ 


•Ji':;:  tti  .2?  - 


s . 


52 


placing  of  responsibility  with  those  who  subscribe d.  Under  the  voluntary  form 
there  were,  it  was  contended,  no  adequate  means  of  getting  members  to  live  up  to 
their  obligations.  Under  the  corporate  form,  however,  subscribers  would  sign 
contracts  which  would  be  legal,  bindirxg  and  enforceable.  There  could  be  no  vol- 
untary withdrawal,  the  contract  running  its  full  term  to  the  date  of  expiration, 
during  which  time  the  subscriber  would  be  bound,  legally  as  well  as  morally,  to 
all  obligations  assumed  by  him  therein.  Among  other  things,  promptness  in  report- 
ing necessary  business  information  would  be  Insured,  as  would  the  necessary 
financial  support  needed  to  carry  out  the  pu.rposes  of  the  corporation. 

These  arguments  are  passed  on  to  the  reader  for  \h.at  they  are  worth. 
They  involve  prinarily  questions  of  law;  which  in  tima  will  be  passed  upon  by  the 
courts.  Undoubtedly  one  of  the  serious  weaknesses  of  the  voluntary  type  is  the 
lax  manner  in  wiiich  members  carry  their  responsibilities.  The  irrfliction  of 
penalties,  for  infractions  of  rules,  such  as  is  provided  for  by  the  corporate 
form  of  association  is  a business  lil-'e  way  of  coping  with  this  difficulty,  say 
the  advocates  of  this  plan.  Advocates  of  the  voluntary  type,  ho'wever,  maintain 
that  the  infliction  of  penalties  is  out  of  harmony  with  the  very  purpose  of  the 
open  price  association,  in  that  it  tends  to  tear  down  the  very  thing  that  the 
open  price  plan  aims  to  build  up,  namely/  a mutual  spirit  of  friendliness,  con- 
fidence and  trust  between  members. 

The  infliction  of  penalties  is  at  best  a cru.de  means  of  securing  a 


1. 

The  Armstrong  "Bureau  of  Related  Ii^dustries , Chicago,  Illinois,  is  organized 
as  a corporation  to  do  open  price  work  for  manufacturers  ^;h.o  become  subscribers. 

In  this  case  a bond  deposit  is  required  as  a guarantee  of  faithful  performance 
of  all  terms.  For  an  explanation  of  this  system,  see  Ferry,  Montagiie  In- 
telligent Selfishness.  Chicago,  1919,  Ch.  6. 


; mioTi  XtmistxTiav  dilv  i^flLt<Slau-toc^^&t 

oif  n^!  97ll  oS  s^w&arsa  »no*«  oo  ,&afcii»»?Cfco  mfHi 

fi53i*  bZim-  elJPio^oD  •rf-t  7«n(T  . cr«>|,j*ilXcfo  ’ititff  \ 

,-<S  ' ■• 

-!oy  on  •tf  flow  bam  thiJftt  •tm»z$ttoo 

* b*  ’ 

,-’wi-*^4’sac*  Jo  eija>^»£f^  iv#  o-wi#  tfc4T-‘W  ^liswrfjfe^lw  %i? t«xr 

4 e-  »»  ri<r^  t»  ■^'♦asl  .Iwtnxf  »i(  elxrc^  aal4  /bi#F^fti»x4Aa 

t^.,  '-■••  ' 

->trojn  ai  t »9tntqtso^r  . tSfOi}  ail rf  ytf  b m^ft  r^  XX) 

* . mlincqvoo  -.K?  ,V*t»ueo  fca6*jie  #-aa<?st>icvla^ 


-‘j 


.{fj-jcm  vim  t«b«on  ot  iio-i6t«i«<r.  loas^rmr  ••»»■? 

^ ■*  *'  ■ ■ '.  . -. 

^}«r  fcd  fra;;  xti  A:?  .rt  ^*J[  ^ tsoM^W.-p 

* ■-  • c * ’ '‘J  ' ■-'•i  ' •■>._|i’-,^ 

^,-'J  r;  X’t^a^ro*'  -vrft  \0  MtnuoiB-^  ' c't5}  V>  Btsu  xSbaiiachdB 

. ■ V ^ ^ - t,  . yf  ■ 

oijltcll\al  dffT  . ^IacTsI  ” stiaMi  t rt»  ftX  ri^afMei.  zMki.\ 

-yi  ' ■ '■'>,  ■ *-) 

; 4 . S'  m5  < ‘ i V 

pea  xtf  «1  MS  rfacft  ♦o  laof/osntai  «Uir^ 

t ^V’ 

. ,v  *'■«&, ■*lo  *»ft3rittar J3 

^ '43'..  . 4^*:  V 

* ,ifqrj  yu^Ji^Xov  ' A ‘‘viwtfi  flfStJ’ 

■’  - 4 • * ''  4^  j 

H Mcchjs^  s!c\»  '^  ‘-  linaom  ^ fw» 

M ' ^ .■■ 

jT]  ■?<' 

4 «cT3,.  iis#^  od  aftaM;  ai  im-ia  aj  .eroiifalwjawi  asXw.7^ 

► ” "*  ' - " ^ 

_ -V3I.O  , i:*;fiiry«  Xf(«arv7  .;jir  tiX  V'e?  »Sii^  c^sl 

- . : ..."  Si 

' '"  » /3*urrd  bam  mtjtmbti 


''  ' i'  ■ •'  »— 

HuJmvta  •!'  .a^WillT  ,o?>«.%*.rC  , b^Smt^S  i(P  w«u<T  3.54^-tA  iiff 

or^»  *taxciaal:r<^»a  xaVshtoW  roit^o  c4>  o>  aoi<fa7o<r*a»  #* 

-ai  ‘flrKTTjp*,  s*4  -J3#x«  «XifJ  ^ aPli.Ec»l£p:«  o«  r^'i  4 wna4;  IX i.  Op' 

.a  .CXPI  ,o?4Ho2xifc 


53 


alnin-rcon  degree  of  cooperation  from  those  who  in  the  absence  of  this  provision 
would  perl-aps  disregard  their  obligations  entirely.  Possibly  a stage  of  ethical 
development  among  business  men  has  not  yet  been  reached  which  vd.ll  pcmcit  of 
their  relations  with  one  a:iother  being  left  entirely  to  the  field  of  honor. 
Practica^-ly  all  of  the  voluntary  type  ox  open  price  associations  have  fcrand  it 
necessaiT  to  compromise  with  their  principles  to  the  extent  of  inflicting  a pen- 
alty of  a kind,  at  least,  upon  members  who  fall  to  furnish  tlie  infomation  called 

for  by  the  secretary.  The  simple  rule  adopted  is  that  those  who  do  not  contri- 

1 

bute  information  shall  not  be  entitled  to  receive  any. 

Tlis  writer  is  inclined  to  t}re  point  of  view  that  the  "loose"  form  of 
associauion  character! sxic  of  the  Eddy  typ'3  is  the  pireferable  kind.  It  is  char- 
acteristic of  h"uiaati  nawure  to  recel  against  restriction  or  restraint.  The  iu>* 
position  of  pronibitions  us^iiilly  generates  a desire  to  circujnvent  them. 

With  respect  to  the  relative  immunity  of  the  tw^o  types  from  visitations 
of  the  law  perhaps  the  only  safe  statement  tljat  a layman  can  make  is  that  the 
>-0urws  will  seek  to  punisn  those  who  are  guilty  of  violations  of  the  law  regard- 
less of  the  form  of  association  that  may  have  been  adopted. 

Irrespective  of  whether  they  belong  to  the  corporate  or  the  vol-ontar^^ 
type  of  association,  axl  open  price  associations  may  be  grouped  according  to  the 
foxlowing  classification:  they  have  either  been  organised  as  open  price  associa- 

tions, or  they  have  come  into  existence  as  an.  outgrowth  of  a trade  association 

or  i/he^  iav3  ^ad  tneir  functions  assumed  by  trade  associations  as  a departmental 
2 

activity.  Most  of  the  associations  that  were  organized  by  Idr.  Eddy  would  belong 


^’Eor  a further  discussion  of  the  VTSaknesses  of  open  price  associations  see  ch. 6. 
A simixar  classification  is  made  by  H.  E.  Tosdal  in  his  article  on  Open 

Price  Associations  which  appeared  in  the  American  Economic  Eeview  for  June.  1S17. 
See  p.  336. 


•»! 


\o  BZOb&<S&  Ad9  aX  ^Ss  e»ocC^  aon%  jairriftinri 


e»  . 

idu  ^4  6|«^  K nxrcWuaiitfd  "^Oitn^Xh^  9X^A±itq.  \lx/Cff> 

. ■'  ' '5  ,1 

lu  Ji2LT*f  r.fiv,'  1 «lfO«9^  7X>iS  'e*if-’£S0* 

•XQSSGd^  Of  ’^tihoiiA  9oq  d&iM 

AX  teccfx  yvsc  • :;%irAict©«ifC,  a«>qo  lo  i^Mc»Xc-t  ."i®  Uh 


■W  :, 


*•  >‘  ’'  '™ 

^dXr«o  aalioirr'^'ldJiX  4t-aicl  t'j  Xi*l  arilir  ‘f^eeoX  :?>»  »_  ^;<r 

^.  • * ■ ' . " ^ V',  ':- 

-itjnoc'  .^<a  <^6:C5  fjftS/  « X'i;'*  * ::ofc4i  i>r  «*  jX  iii  w£T  trf:  *:< 

, ‘V'i^  . -■-'/<»  - '^f'  Mtf/  -?  »c  rrcj  £X^  £!&:.- win, «; 

la  c-dl  cr.j  ;}iuCc  fwxT  Ic  •fi’flatj  nti^  as  ^fislXcr-X  ? X 

' ,4  • 

V-i 

-'i,-'.--'  »i  rT  .I'al-af  tX<tirfl>li''l<;.  j_,t  r^i  ’r|>jbg..  »r‘i  lo»  o J Mi 

*4^  . ..'icafflio-s  la.  r’o!.*c-ln;t.‘vr  oa  cirf riecaat  1«,  oi:?ikl^»2c4 

■ •«-T'‘-."  • ’^  ••  • * - Hfk  »'l 


» ;'•■  . V 4^- 1 iiii'’ 

. :«!.*  Sst^'T’r-n?*. 'c  cs  A er-I“i!fJxici^  to  {r»lSi«w 


;%fv-vrit.:v  iatl  uv-?  cmf  s^3  It  cviseXea  ^ ' &)<,  d:iM  . 

^ .■  'I  " ' . ' 

9^  tM't-  tj  ftt^W  « ancvOKf'irr 

I - • - - ' '• ' J : H *-3  • ^ ^ ' 

♦ U viti  'i?  to  fcjA  ^ oeoXf*  .^siair;  oeSSt-im  a f-:;  05r| 

joi* ’'•■'•oo'  '>Yttl  wto't  .iolSAXoof^A  Is  srrol^i^ill 
TJ<4*<irit4>^  Off?  10  ofiTiOviot  0^  itaatvijr  lo  ' **  i. 

. - ■ ^ ■ .1  r • **-  , 

fVrfS'  Hi  vr-r'-sootsA  t *<j;nna  - otf . X»*  f^oiSfcJoo&^i  r.c.'i-  »5w.w  .aols^XootM  to  a ^’•iryn 
I la  - n \ ' ’ , vi^K 

I • 'r-  . '{3 

1-xaooeaA  r,i<|£r  04' ikMliO^sio  raw?  t»df »«  fe’-fii  :.wif4aitif«uaIo  ioXwolla'q 

^ ^ ..;  ^ ; ^;„  .'■  iv^ 

cois^Xoot**  u^s\m  ta  litfwct  irta  »ooW»Ji&  ov#tf  to  ijaaoJ 

• ' - ■ ■ ‘ - .-.  ‘ , • ■ •A’atJw:  ■ 

PtfXtsWijt-rU  to  §4  iiCiQUAXx^^nt  \tf  ifirotaajul  iJaojp  -‘itkX  tea'X 

- =.■''■  ' ..  * V ^ 

JtXaw  ■ •‘*5C  ttf  XtiaXrtsato  fi.'itf  lo  .•',:lrXri:,4c' 

...  4.  ' laiWl  '4 


<;Vv: 


1 ' /'■  ,1 

t ilvi 


t i.  * T i-W1  -S4i'  . , 

.'^.fft  ML  - tc  «otfoa.4J'?j  jtf'  -txAl'*  'S 

vC  oO  ^Xoii'-;#-  »ti  ffA'idiJIix  .T  .H  ‘l'** 

.''X-5;  tot  o,-teoaoo!l  tprfs  r.i,  Irttfi^sisJa  tiiOi:^±JaoafiA^  oaXt"' 

• <{tj« 


54 

to  the  first  group.  Prominent  ex-amples  of  the  second  groun  are  furnished  hy  the 
Southern  Pine  Association  and  the  American  Hardwood  Tfenufacturer 's  Association. 
Most  of  the  other  lumber  manufacturers'  associations  belong  to  the  third  group.^ 
In  general  it  may  be  said  that  the  associations  v»hich  belong  to  the 
third  group  show  all  manner  of  differences  in  the  character  and  scope  of  their 
open  price  activities.  This  is  naturally  explained  by  reason  of  the  fact  that 
havin?-  retained  their  identity  as  trade  associations,  they  have  adopted  only  such 
phases  of  open  nrice  activity  as  have  seem.ed  to  offer  a solution  for  problems 
which  the  old  type  of  organization  has  been  unable  to  handle.  The  one  element 
of  onen  price  work  that  all  the  associations  of  this  grcup  have  adopted  in  common 
is  price  reporting.  With  scare  this  is  as  far  as  the  semblance  to  the  Eddy  tyoe 
of  association  goes.  Others  arrange  for  the  sporadic  exchange  of  information 
among  members,  and  still  others  may  have  a regular  and  definite  system  of  ex- 
changing information  of  a limited  character.  Seldom,  if  ever,  will  it  be  fotind 
that  an  association  belonging  to  this  group  has  anything  like  the  complete  system 
for  exchanging  information  among  members  that  is  characteristic  of  the  Eddy  type. 
It  goes  without  saying  that  the  associations  belonging  to  the  first  two  ^rouns, 
having  been  specifically  organized  to  do  open  price  work, are  usually  patterned 
after  the  Eddy  tjrpe  of  association. 

f/EMBSPSHIP 

In  order  to  get  the  hest  results  out  of  their  cooperative  activities, 
open  price  associations  endeavor  to  gather  within  their  fold  all  competitors  who 

1 -TP 

xamples  of  the  third  group  are:  National  Box  Manufacturer's  Assn;  Na,tional 

Canners' Assn;  National  Association  of  Brass  Manufacturers;  National  Machine 
Tool  Builder's  Assn;  the  various  associations  of  millers  etc. 


l£o  -Ji®r^flsa6#-  tf^rtfelason^  .csCrcn:j;?riil 


' *acU«i^ciii  s’7«iris»V£rrt4vv  lac^tTmlt  iiwHrfiykl  e.*?v  ^rtiT  ^ 


IK 


rtJT?  Xitinf  ^ifS  aa?2>kf5o*»s  «nxri»£ Vfsfio  •x£»::/w^  i«fSo  aif# 


**5f  cJ  ?f»r»<f  rf5trS»  JUwM#ioc*«Ji  *4^  ijwfjr  «4  t*o  Ini«x»i5  nX‘  ^ 


X, 


r 


*r^l»43  fira  ’t9ioinjuio  9if3  at  Jtpoams'i'Ht  1o  -xitfsrm*.  XX4  «ro4#  fcijt 


Si 


#nd;^  ?**■!  •<»  aotui«? 


ifc>0i.  xf**  «vj4  4t£  'xl9dJ  y^al 


tax  nci^ttfy*  ^ 'tilXo  r-‘  ^3l»A■  ormx.  im  ^Sfvtfat  Ic 

1 w S '4,  - 

W:  aiio  9/ff  ^ - e#  el4uH3  ^^t«s *irN  Mo  •orftf  *fir,l< 

1 " ”'  - 

1 WkcoiOo  rrr  A'Sr.fccf'H  £Yj«4  a3Di:')»  olrfJt  ^ IXJ  lor5t  4?ew  Mltqr  noqo  14 

I fgfsi  tbi'R  a4^  13  «irf>  loii  e!3t9  .jutXiiojj«  oMyq  4t^ 


*3»ljftano’knX  5^  97.rrp.d^a  sibeaoat  9d^  'lol  e5^rtiYY||.*aYirf^O  .^«<^||.,rjGM34iX90»£i^. 


-XB  lo  ‘ralin*-'i  * -aitid  -^aa  aYiitlc  fjCii* 


t^ioscl.  »i  4i  Uiw  ,ia^0  It  ,mabl»d  .Yivi>*»!#do  fiajjfjrJI  « Ip  rmlJjianclnt^l^/*. 


Mil  3 

I ^«Y1  ^>‘»rqpB<»  fWif  44iX  i^ELtrC^tia  lA/t  uj  jeii«f{0^4  aB3l}«tdoll||f.  o»  ^£>41^ 

•’  . .V  ‘ ' * ‘‘i  - ^ 

L5*Tti  erf?  \o  »X  /Arf?  wmc2jidr*i  s/ioaH  «ol^i'tndtai  yrlsaajfcSf> 


,£qaoz;i  cmf  ufj  0/  |fi'.i(mle4  *i?r  ’ ^/rX »o  ? *«  »4!f  fiiifJ  5oo4tlw  upo-r 


icr~’5f  ^*a»;  -^Xjurir^  rTJS^ahf-oa  osXia  itiflP  ar^otf 


■>' 


.tsal^HtogaPn  lo  Yp; 


jC-aitXvIrixi  -iYiV4Y»tjf>cs  t/i.*^i  lo  -ifo  f jlumtrx  viiif  ifxfi  (f^:^  oJ  i«C'YO  nX  ' 

• ‘’v  1 . _ - »:  , 'i  i' 


ryo^li'otja^c  rrVi?0":  o?’  -iiitiiol***  in»i^a;oefM  ffs; 


►- 

M 


.'  ' : ♦.  A ■«  ’'s»^!xyJ'o«^4faa!X '»p.$  XlUcUf^k  :*rJt  qxro^.fcYi  044\lo 

;pT>t/;:fopla^wW  iww?  \c  5#lw<4*  ia^oitaJf^iaitA  S*:<t 
.n***  »-^II.*ffl  *iQ  «ta> Jt  ^foo»pi«f  0ob-/':i»r  1*5^'  ,'s*B4^^-WabIlirC 


Xol 


-1-;  • 


jJ*'  ■■  • I 

“■.I  • 


55 


are  engaged  in  the  various  lines  W-iich  these  associations  would  aspire  to  control. 
It  will  therefore  he  found,  that  in  so  far  as  the  industry  is  localized,  the  rrem- 
hership  of  these  associations  will  he  localized.  In  so  far  as  the  territorial 
distribution  of  the  industry  is  a national  one,  memhershin  will  he  snread  over  a 
wide  area.  No  memhers  of  the  National  Association  of  the  Finishers  of  Cotton 
Fabrics,  for  exaimle,  will  he  found  anywhere  hut  in  the  East,  for  the  industry  is 
localized  there.  On  the  other  hand  menihership  in  the  Leather  Beltine  Exchan<?e 
for  exanple,  is  distributed  over  a wide  area,  as  is  that  of  the  Merican  Hard- 
wood Manufacturers'  Association  or  the  National  Coal  Association. 

The  territory  should  undoubtedly  he  limited  sui*f icient ly  to  permit  of 
a ready  exchange  of  infoimation  and  meetings  of  m.ernhers  at  freqiaent  intervals, 
^ere  the  industry  is  such  that  membership  must  necessarily  cover  a wide  area 
local  exchanges  may  he  provided  for,  as  in  the  case  of  the  National  Coal  Associa^ 
tion.  Before  price  reporting  was  discontinued  by  this  association,^'  four  exchang- 
es were  maintained  in  all,  - one  in  Washington,  one  in  Chicago,  one  in  Cincinnati, 
and  one  in  Pittsburgh.  The  work  of  these  exchanges,  or  '*bureaus”,  as  they  are 
called  in  the  coal  industry,  was  directed  from  the  national  headquarters  at 
Washington.  Instead  of  making  their  reports  to  one  central  amency  for  the  in- 
dustry,  operators  would  send  them  through  their  local  associations  to  the  nearest 
local  bureau.  Each  local  bureau  in  turn  would  exchange  its  comciled  reports  with 
every  one  of  the  other  bureaus.^  The  Associated  Metal  Lath  Manufacturers  also 
have  a similar  method  of  relaying  information  from  local  bureaus  to  a central 
office.^ 


^•July,  19^. 

2. 

Kow  the  National  Association  Peports  Sales  , The  Black  Biamond  Oct,  11  1919 

pp.  322  - 324.  ’ * - » 

3. 

Annual  Official  Program,  New  England  Builders  Supnly  Association,  Boston  1917 
p.  43.  , 


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56 


'%ere  membership  is  spread  over  a wide  area  it  is  usi^ally  foiar.d  necess- 
i ary  to  -orovide  for  group  meetings,  "'^or  this  pumose  the  Leather  Pelting  Exchange 
i divides  its  membership  into  two  groups  - one  comorising  the  manufacturers  of  the 

, West  and  the  other  those  of  the  East.  The  Western  group  meets  in  Chicago  each 

month  and  the  Eastern  gro-ig)  in  New  --ork  one  week  after  the  Chicago  meeting,  thus 
I enabling  the  Secretary  to  be  present  at  both  meetings  and  coordinate  the  work 
done.  Further  coordination  of  the  work  of  the  two  groins  is  secured  by  holding 
a ooint  meeting  every  three  months.  These  are  held  alternately  at  New  York  and 
Chicago.  The  American  Hardwood  Manufacturer  s'  Association  has  conducted  four 
I monthly  group  meetings,  these  being  held  at  Cincinnati,  Ohio,  Memphis,  Tennesee, 

: New  Orleans,  Mississippi,  and  Jackson,  Mississippi.  Once  a year  all  the  groups 

have  come  together  in  a convention.^ 

Because  It  is  to  the  advantage  of  an  open  price  association  to  have  as 
many  members  as  possible  and  because  restrictions  would  be  out  of  harmony  with  th? 
open  price  plan,  it  Is  found  that  restrictions  upon  membership  are  practically 
non-existent.  Membership  is  ordinarily  open  to  any  firm,  corporation  or  indivi- 
j dual  in  good  standing  engaged  in  the  particular  line  of  business  involved,  pro- 
j viaed  agreement  is  made,  first,  to  comply  with  the  provisions  of  the  constitution 

I and  by-laws,  second,  to  pay  the  required  dues  and  fees.  Hov'/ever  it  is  usually 

specified  that  only  those  who  are  engaged  in  the  manufacture  of  the  product  in 
v^ich  the  association  is  interested  are  eligible.  In  this  connection  at  least 
i ^ two  associations  would  permit  others  than  manufacturers  to  become  members  under 

I 

I certain  restrictions  not  enforced  upon  the  others.  The  Ohio  Millers'  State 
i Association  permits  any  manufacturer  of  flour  or  meal  to  become  a "Begular”  mem- 


An  address  de- 


W.  V.  Suauldlng,  Experiences  in  Cooperative  Comretition  o.5. 
llvered  before  the  Babson  Conference,  Sept.  15,  1915. 

Sales  Report  of  A.  R.  Oadd,  Record,  American  Column  and  Lumber  Co.  vs.  U S 
vol.  2,  p.  1067. 


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57 


“ber  of  the  association  and  "other  persons,  firms,  and  ccroorations  may  be  admitt- 
ed and  become  "Jissociate"  members,  ♦ * * * "and  may  have  all  the  nrivileges  of 
Eegular  members,  except  voting.^  The  Fnit  Goods  Ivlan-ofacturers  of  America  also 

provides  for  regular  and  associate  members.  The  regular  members  are  to  be  those 

2 

vho  participate  in  the  reporting  plan.  The  associate  members  are  divisible  into 
two  classes.  One  class  consists  of  maimfacturers  who  do  not  p--^rticipate  in  open 
price  work;  the  other  class  consists  of  sales  agents  or  commission  houses  vihich 
sell  knit  goods,  and  this  class  is  to  have  no  vote  in  the  management  of  the  asso- 

3 

elation.  It  is  evident  that  manufacturers,  even  in  the  few  cases  where  they 


permit  others  than  members  of  their  own  class  to  come  ixito  the  association,  are 
careful  to  see  that  no  control  of  management  shall  fall  into  any  other  hands 
than  their  own. 

The  miles  determining  the  manner  in  vihich  members  shall  be  voted  into 
the  association  vary  considerably.  The  most  common  practice  seems  to  be  to  re- 
quire the  affirmative  vote  of  the  majority  of  m.embers  present  at  regular  meet- 

4 

ing.  The  Tan  and  Dye  Institute  requires  the  affirmative  vote  of  three-fourths 

5 

of  the  members  present.'  The  Society  of  Kfenufac tuning  Confectioners  requires 
the  approval  of  the  executive  committee  followed  by  the  majority  vote  of  members 

g 

present  in  regular  meeting.  The  American  Hardwood  Manufacturers'  Association 

7 

merely  requires  a majority  vote  of  the  Board  of  Directors;  the  Salt  Producers 


^'Constitution,  Art.  3,  Sec.  1,  2. 

2 

‘Constitution,  Art.  4. 

^'Ibid,  Art.  5,  gec.l, 

^'For  instance,  the  Ohio  Millers'  State  Assn;  National  Coal  Assn.;  Leather 
Belting  Exchange;  Steel  Barrel  Manufacturers'  Assn. 

5 

‘Constitution,  Art. 3,  Sec.  2. 

® 'Constitution,  Art.  4,  Sec.  2. 

7 . 

Constitution,  Art.  3,  Sec.  2. 


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58 


a majority  vote  of  the  executive  committee.  The  .American  Tack  Manufacturers ' 

2 

Association  requires  unanimous  election. 

Provisions  are  usually  Inserted  in  the  constitution  indicating  under 

’/\hat  circumstances  members  may  be  excelled.  The  usual  provision  is  that  they 

may  be  excelled  "for  good  and  sufficient  reasons"  by  a vote  of  the  members,  a 

majority  or  three- fourths  vote  usualljr  being  required.  The  more  common  reasons 

for  expulsion  are  the  non-payment  of  dues,  and  breach  of  the  constitution  and 

by-laws.  Some  associations  make  members  liable  to  expulsion  for  filing  mislead- 
3 

ing  information. 

Expenses  incurred  in  the  operation  of  open  price  associations  are 
usually  defrayed  by  membership  dues  and  the  levy  of  snecial  assessments.  In 
addition  some  associations  require  the  payment  of  an  initiation  fee.  The  Salt 
Producers'  Association  has  an  initiation  fee  of  $2C0.00,  the  Pressed  Metal  Asso- 
ciation $50.00,  the  Tap  and  Dye  Institute  Jl^lOO.OO,  and  the  Hardwood  f/!an\Tf ac tun- 
ers' Association  $25.00."^  In  exacting  payments  for  dues,  most  associations 
apnarently  go  on  the  theory  that  members  derive  benefits  from  the  work  of  the 
association  in  proportion  to  the  volume  of  their  business.  Practically  all  of 
them  base  their  dues  and  special  assessments  on  a capacity,  production,  shipments 
or  sales  basis.  Eegular  members  of  the  Ohio  State  Millers'  A.ssociation  pa,y  dues 

annually  in  advance  based  upon  the  daily  capacity  of  each  mill  owned  or  operated 
5 

by  each  member.  Th.e  commion  practice  in  the  lumber  industry  is  to  base  dues  on 
the  number  of  feet  of  logs  cut  annually.  Manufacturers  belonging  to  the  Hard- 

^ • Constitution,  Art  3. 

p 

•Tosdal  H.  E. , Open  Price  Associations  American  Economic  Eeview.  Vol.VII,  No. 
2.  , p.  339. 

^•Society  of  J%nufacturing  Confectioners,  Constitution,  Art.  7,  Sec.  8;  Tap  & Dye 
Institute,  By-laws,  Sec.  5. 

4 

’Tosdal,  H.  E.  Open  Price  Associations  , Economic  Eeview,  Vo3 . VII  No  2 

p.  339.  . • » 

5 

’Constitution,  Art.  6,  Spc.  1. 


I ’C  A-  ' ? ' i 


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59 


wood  Manufacturers'  Association,  for  examnle , pay  dues  in  twelve  monthly  install- 
ments, based  on  an  assessment  "at  the  rate  of  not  to  exceed  five  cents  ner  thou- 
sand feet  log  scale,  with  a maximum  of  $2000.00  uer  annum,  based  on  the  number  of 

feet  of  hardwood  logs  c*at  for  the  preceding  calendar  year."  ^ All  assessments 

2 

levied  by  the  Salt  Producers'  Association  are  on  the  basis  of  output.  The  same 

is  true  of  the  ITational  Coal  dissociation.  The  National  Chair  Manufacturers' 

Association  bases  its  dues  on  the  volume  of  shipments.  Tne  Tap  and  Dye  Institute 

and  the  Steel  Barrel  Manufacturers'  Association  and  the  Society  of  Manufacturing 

4 

Confectioners  base  their  dues  on  the  amount  ox  sales. 

Obviously  there  is  a disa.dvantage  vdiich  militates  against  the  proper 
financing  of  the  work  of  an  association  in  having  dues  based  upon  the  amount  of 
business  done.  Those  in  control  cannot  be  sure  of  securing  stated  amounts  of 
money  from  7/ear  to  year.  It  is  therefore  rendered  difficult  to  plan  a program 
of  financial  expenditure  that  will  not  overreach  or  underreach  the  size  of  the 
fund  that  is  available  at  any  given  time,  "hen  business  is  poor,  the  income 
from  dues  is  small,  and  the  consequence  often  is  that  operations  must  be  curtail- 
ed. Of  course  this  ob,5ection  loses  force  vdien  those  in  control  are  sagacious 
enough  to  reserve  for  the  lean  years  surplus  fun^  that  have  been  collected  dur- 
ing the  fat  years. 

Members  as  a class  have  as  their  chief  duties,  aside  from  the  payment 
of  dues,  first,  to  furnish  information  to  the  central  office,  second,  to  attend 
meetings.  Their  chief  privileges  are  to  vote  at  meetings  and  to  receive  such  in- 
formation as  the  secretary  may  circulate  among  them.  Usually  the  rule  is,  that 

^'Constitution,  Art.  5,  Sec.  1.  '°rinted  in  the  Becord.  U.  S.  vs.  American 
Column  and  Lumber  Co.  Vol.  1,  p.73. 

2 

’Constitution,  Art.  5, 

^’Constitution,  Art.  5. 

4. Constitutions , Art.  6,  Art.  5,  Art.  7,  Sec.  9. 


«T*  r?  • 


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60 


■unless  members  are  willing  to  f-umish  information,  they  receive  none. 

OFFICERS 

The  list  of  officers  of  an  open  price  association  differs  in  no  essen- 
tial particulars  from  that  which  is  found  in  any  formal  type  of  association. 

These  officers  are  a President,  Vice-President,  Secretary,  Treasurer  with  an 
Executive  Comnlttee  or  a Board  of  Directors,  The  Ohio  Millers*  State  Associa- 
tion has  both  a Board  of  Directors  and  an  Executive  Committee.^'  Such  an  arran>?e- 

ment  is  not  often  found.  In  the  lumber  industry  nrcvision  is  also  made  for 

2 

several  vice-presidents.  The  typical  Eddy  association,  however,  seldom  has 
more  than  one  vice-president. 

The  president  is  ustially  elected  annually  by  a majority  vote  of  the 
membership.  He  is  practically  alwaj’-s  a man  active  in  the  line  of  business 
which  the  association  represents.  In  fact  the  constitution  of  the  Leather  Belt- 
ing Exchange  specifically  states  that  the  "President  shall  be  a member  of  the 
Exchange,  and  engaged  in  the  nmmfacture  of  leather  belting."^  He  performs  the 
usual  duties  of  the  chief  executive  officer.  In  most  constitutions  they  are  not 
minutely  specified.  They  may  be  summed  up  as  follows:  to  preside  at  all  meet- 

ings, including  those  of  the  executive  comi.  ittee;  to  appoint  all  committees  not 
provided  for  in  some  other  way;  call  meetings  of  the  Executive  Committee,  and 
special  meetings  of  the  association  upon  written  request  of  a certain  number  of 
members,  as  well  as  call  meetings  of  all  permanent  and  special  comniittees . He 
is  generally  an  ex-officio  member  of  all  committees.  It  is  usually  customary 

^'Constitution,  Art.  4. 

o 

•Hardwood  Manufacturers'  Association,  Constitution,  Art.  8,  Record,  Vol.  1,  P,7£ 

3._  _ 

By-Laws,  Sec.  2. 


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61 


for  him  to  review  the  work  of  the  year  before  the  anrmal  meeting. 

Ihe  Vice-President  assnmes  the  cbaties  of  the  President  daring  his 

absence. 

Most  constitutions  provide  that  the  treasurer  and  the  secretary  may 
be  one  and  the  same  person.  In  cases  v\here  the  treasurer  is  not  also  the  sec- 
retary the  common  practice  is  to  elect  him  at  the  annual  meeting.  Only  in  a 
few  cases  is  it  customary  to  elect  a tressu.rer  vfhen  he  is  also  the  secretary.^ 
More  often  the  procedure  followed  is  that  the  Executive  Committee  makes  an 
appointment  subject  to  the  approval  of  the  membership.  The  constitution  of  the 
Leather  Belting  Exchange,  in  contrast  to  the  general  nractlce,  snecifies  that 
the  Treasurer  shall  be  a Trust  Co.  or  other  banking  corooration  of  recognized 
standing,  and  shall  be  appointed  by  the  Exchange.  In  general  it  is  the  duty 
of  the  Treasurer  to  collect  and  receive  all  moneys  of  the  association;  pay  all 
orders  for  money  vdien  countersigned  by  the  Secretary,  and  keen  a correct  record 
of  all  receipts  and  disbursements.  If  the  Treasurer  and  the  Secretary  are  united 
in  one  person,  his  signature  upon  checks  is  usually  considered  sufficient.^ 

The  Executive  Committee  usually  consists  of  one  or  more  of  the  elective 
officers  in  addition  to  several  elected  members  ranging  anywhere  from  three  to 
seven  in  number.  The  Executive  Committee  of  the  Ta-o  and  Dye  Institute  is  com- 
posed of  the  President,  Vice-President,  and  three  other  m.erabers  elected  at  the 
annual  meeting.'^  That  of  the  Salt  Producers'  Association  is  comnosed  of  the 

^'Tap  & Dye  Institute,  Constitution,  Art.  1. 

^•By-Laws,  Sec.  4. 

‘^•Society  of  Mamafacturing  Confectioners,  By-Laws,  Sec.  3;  Hardwood  Ifenuf a ctur- 
ers'  Association,  Constitution,  Art.  9,  Sec,  3. 

‘Constitution,  Art.  4,  Sec.  3, 


62 


President  and  seven  elected  members.  Only  three  members  comprise  the  Executive 

Committee  of  the  Leather  Belting  Exchange.^'  The  Executive  Committee  of  the  Ohio 

Millers'  State  Association  is  made  up  of  the  President,  Vice-President,  Treas^^rer 

2 

Secretary,  and  a Board  of  Directors  comprised  of  five  elected  members.  The 
common  type  of  Executive  Committee  has  the  general  po\';er  of  management  of  the 
affairs  of  the  a,ssociat ion.  Its  function  is  to  see  that  all  of  the  objects  and 
purposes  of  the  association  are  carried  out.  Typical  of  the  powers  given  to 
Execiitive  Committees  are  the  following;  1.  Call  special  meetings;  2.  Fill  vacant 
offices  until  the  next  annual  meeting;  3.  Detain  counsel,  4.  Titarloy  a Secretary; 
5.  Authorize  necessary  exnenditu.res  Practically  always  there  is  a provision 
that  all  acts  of  the  Executive  Committee  must  be  submitted  to  the  next  regular  or 
special  meeting  of  the  associa,tion  for  auproval. 

The  office  of  the  Secretary  is  by  far  the  most  important  cog  in  the 
machinery  of  the  open  price  organization.  The  Secretary  of  one  open  price  asso- 
ciation writes  as  follows;  "The  success  of  any  individua.1  organization  depends 
entirely  on  the  Secretary  and  unquestionably  most  of  the  failures  of  the  asso- 
ciation work  have  been  due  to  liis  ignorance  of  what  constitutes  proper  coopera- 
tion  and  how  to  attain  it.”  A representative  of  Babsons  Statistical  Organiza- 
tion who  has  been  active  in  acquainting  the  business  world  with  the  open  price 
form  of  cooperation  states  that  a Secretary  shcraldbe,  first,  an  executive  offi- 
cer, not  merely  a clerk;  second,  he  should  have  business  experience,  education, 
tact,  and  ability  to  speak  in  public;  third,  he  should  command  respect  for  his 
merits  as  a man;  fourth,  that  it  is  not  necessary  that  he  be  familiar  with  the 

^■•By-Taws,  Sec.  2. 

2... 

By-Laws,  Art.  1,  sec.  5. 

3 

•Society  of  Manufacturing  Confectioners,  Constitution,  Art.  3,  Sec.  4. 

4. 

Letter  from  D.  S.  Hunter,  Secretary  of  the  Steel  Barrel  Manuf actiirers ' Assn. 
Dec.  20,  19^20. 


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63 


line  of  "bixsiness  that  the  association  is  at  work  on.^  It  shcrald  he  added  that  It 
is  absolutely  necessary  that  he  be  a man  of  integ^rity  and  dimity,  for  he  occunies 
a position  of  confidence  and  trust.  Because  of  his  position  of  confidence  and 
trust  a nrovision  is  found  in  most  constitutions  specifying  that  he  must  have  no 
connection  or  affiliation  ’;<rlth  the  line  of  business  with  which  the  association  is 
Identified.  The  Secretary  is  usually  the  only  salaried  officer  of  the  association 
Most  associations  outline  the  duties  of  th©  secretary  very  minutely. 
Undoubtedly  this  is  done  because  of  the  feeling  of  distrust  that  prevails  among 
conpetitors  who  at  the  outset  of  their  experiment  in  cooperation  are  in  a state 
of  mind  which  promots  them  to  throw  all  the  safeguards  that  they  can  about  them- 
selves. Some  associations  require  that  the  Secretary  retain  in  absolute  secrecy 
all  information  furnished  him  by  members,  and  it  is  often  specified  that  when  he 
has  ma,de  proper  record  thereof  the  statements  conveying  the  irjformation  shall  be 

p 

returned  to  their  owners  or  be  destroyed.  In  one  case  the  Secretary  is  required 
to  keep  this  information  secret  even  from  the  Executive  Comndttee,^ 

The  Secretary  may  be  either  elected  or  appointed.  Ehere  election  is 
the  rule  the  electing  is  usually  done  by  the  association  as  a \vhole;  \-*iere  ap- 
pointment is  the  rule  the  appointing  is  usually  done  hy  the  Executive  Committee 
subject  to  the  approval  of  the  association.  There  are  exceptions  to  both  state- 
ments, howrever.  In  the  case  of  the  Ohio  Millers'  State  -Association  the  Secretary 

■^‘Address  of  G.  E.  ?/Iacilwa1ne  before  American  Specialty  Nanufa-Cturers ' Assn. 

Journal  of  Commerce,  Dec.  11,  1916. 

2 . 

’Leather  Belting  Exchange,  By-Laws,  Sec.  2. 

2 

'The  North  Carolina  Pine  Box  and  Shook  Manufacturers'  Assn,  requires  that  re- 
ports received  from  members  be  destroyed.  See  Weekly  Sales  and  Lumber  Price 
-.eport.  The  Leather  Belting  Exchange  requires  that  all  papers  be  returned 
to  their  owners.  See  By-laws,  Sec.  2. 


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64 


1 

is  elected  "by  the  Executive  Committee.  In  the  Leather  Belting  Exchange  the 

2 

office  is  filled  hy  an  election  conducted  by  the  Exchange.  The  same  is  true  of 

3 

the  Tap  and  Dye  Institute.  ^pnointment  is  made  bv  the  membership  in  the  case 

4 

of  the  National  Coal  A.3Sociatlon, 

The  duties  of  the  Secretary,  as  outlined  by  one  association,  are,  first, 
to  provide  and  operate  a regular  central  office  for  the  proper  care  of  business; 
second,  to  take  care  of  fir^ces  and  funds;  third,  to  keep  in  close  personal 
touch  with  all  members  at  meetings  and  by  personal  visits;  fourth,  to  conduct 
necessary  correspondence;  fifth,  to  maintain  and  increase  membership;  sixth,  to 
serve  as  a clearing  house  between  the  miembers  for  the  exchange  of  credit  infor- 
mation; seventh,  to  develop  and  distribute  information  and  statistics  of  educa- 
tional value  relating  to  costs  of  nroduction,  selling  markets,  trade  and  labor 
conditions;  eighth,  to  attend  all  nieetings  and  keep  accurate  stenosraphic  records 

5 

thereof.  Other  duties  sometimes  enumerated  are,  to  send  copies  of  minutes  of 

meetings  of  the  Association  and  the  Executive  Committee  to  m.embers;  to  keep  a 

7 

list  of  members  and  the  date  of  their  election;  to  notify  all  members  of  assess- 

g 

ments  due;  to  notify  all  members  of  the  times  and  places  of  meetings;  to  examine 
"i^ills  and  countersign  all  orders  on  the  Treasurer;"'  to  prepare  an  annual  and 
semi-annual  report  of  all  transactions  and  all  conditions; ^®to  preside  at  all 

Constitution,  Art.  4,  Sec.  4. 

’By-Ia-A=s,  Sec.  4. 

3 

^ Constitution,  Art.  4,  Sec.  Z, 

■Constitution,  Art.  2. 

^■Tap  & Bye  Institute,  By-La-.vs,  Sec.  2. 

^ Leather  Belting  Exchange,  By-Laws,  Sec.  3. 

^•Steel  Barrel  Manufacturing  Assn.,  Constlttitlon,  Art.  4,  Sec.  4. 

^•bociety  of  Manufacturing  Confectioners,  By-Lav.-s,  Sec.  3. 

^^Soclety  of  Manufacturing  Confectioners,  By-Laws,  Sec.  3. 

American  Hardwood  Manufacturers’  Assn.,  Constitution,  Art.  9,  Sec.  4. 


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65 


meetinss. 


TEE  CEMTHAL  OEFICE 


An  essential  part  of  the  structure  of  an  open  price  association  is  an 

office  \<^ere  the  secretary  may  carry  on  the  work  of  gathering  and  disseminating 

information.  Some  associations  have  their  own  central  office  in  charge  of  a 

2 

salaried  Secretary.  However,  a very  common  practice  is  for  several  open  price 

3 

associations  to  have  an  office  and  secretary  in  common.  There  is  a tendency 
in  the  direction  of  centralization  of  tShis  kind.  Not  only  does  it  reduce  exnens^ 
hut  it  makes  possible  the  employment  of  a secretary,  highly  trained  in  coopera- 
tive work,  whose  salary  in  the  aggregate  would  he  too  large,  perhaps,  for  any 
one  association  to  undertake  to  pay.  Secretaries  find,  that  by  a proper  organ- 
ization of  their  office  force,  they  can  readily  handle  several  associations.  In 
fact  the  experience  which  a secretary  derives  from  coming  in  contact  with  the 
problems  ox  several  different  lines  of  business  can  be  used  to  good  account  in 
coping  with  the  problems  that  are  encomtered  by  any  one  of  the  associations. 
There  open  price  work  is  done  as  an  adj\mct  to  other  trade  association  activities 
it  is  customary  for  the  trade  association  secretary  also  to  assume  the  duties 
connected  therewith.  A few  instances  may  be  found  where  an  association  does  not 
run  an  office  of  its  own  nor  employ  a secretary,  but  simply  arranges  for  an  out- 
side agency  to  manage  the  details  of  operation.  The  Pressed  Metal  Association, 
for  example,  has  its  open  price  work  done  hy  a Boston  firm  of  certified  public 

4 

accountants.  Oie  Associated  Metal  I^ith  Manufacturers  and  the  Linseed  Oil 


‘Leather  Belting  Exchange,  By-La,ws,  Sec.  3, 

2 

‘Bridge  Builders'  Society,  National  -Association  of  Fin'shers  of  Cotton  Fabrics* 
Leather  Belting  Exchange.  ’ 

3 , 

A.  A.  Ainsw'orth  and  A.  A.  Blake  each  serve  about  a dozen  associations  in  New 
York  City. 

4 

'Scovell  - Wellington  & Co. 


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66 


Association  operate  through  the  Araistrong  Bureau  of  Belated  industries  which  is 

1 

located  in  Chicago. 

IffiETINGS 


Great  stress  is  placed  on  the  importance  of  oringing  members  frequently 

together  An  meetings.  Most  of  the  associations  that  are  planned  along  the  lines 

2 ^ 3 

advocated  oy  Mr.  Eddy  have  monthly  meetings.  A few  have  them  two  months  aoa.rt 
Those  associations  that  are  really  trade  associations  engaged  in  open  "orice  work 
as  a oranch  of  their  activity  usually  have  meetings  only  once  crted.ce  a year. 
Besides  the  monthly  meetings  there  are  the  annual  and  special  meetings.  The  con- 
stitution nearly  always  provides  a set  date  for  regular  and  annual  meetings. 
Special  meetings  may  us-ually  be  called  by  the  President,  or  on  the  written  re- 
quest of  a certain  number  of  members.  The  constitution  of  the  Leather  Belting 
Exchange  however  provides  that  special  meetings  may  be  called  at  any  time  or 
place  by  the  Executive  Coianittee,  or  upon  the  demand  of  six  members.  That  of  the 
Khii.,  Goods  Mam.;facturers  of  America  provides  that  they  may  be  called  upon  the  re- 
quest of  the  secretary, or  by  five  members,  or  a majority  of  the  Executive  Comm- 

5 

ittes,  or  'hipon  the  sole  authority  of  the  President."  Sometimes  the  date  for 
, ^ 6 
tne  monthly  meeting  of  the  Executive  Committee  is  specified.  It  is  nearly  al- 
ways provided  tloao  members  must  be  notified  of  meetings  aosrtain  number  of  days 
in  advance.  Ths  usual  quorum  for  the  transaction  of  business  is  a majority  of 


Eor  a description  of  the  Armstrong  Plan,  See  I,fontagi:.e  Perry's  book  Intelli- 
gent Selfishness,  Chicago,  1S19. 

2. 

For  Instance,  Leather  Belting  Exchange,  Cotton  Finishers,  Bridge  Builders' 
Society,  Hardwood  Man'ofacturers'  Association. 

3. 

For  instance,  Steel  Barrel  Llanufacturers'  A.ssociation. 

4. 

Examples  are  Knit  Goods  IJanufacturers  of  America;  Ohio  State  Millers'  ASsn. 
^•Constitution,  Art.  8,  Sec.  2. 

6. 

See  Constitution,  Franklin  County  Coal  Operators'  A^ssociation,  Art.  1. 


' ^ ff 


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67 

tlie  membership.  The  Obilo  Millers’  State  Association  provides  that  fifteen  mem- 

1 

bers  present  at  meetings  constitutes  a quorom. 

A few  associations,  judging  from  the  clauses  incorporated  in  their  con- 

2 

stitutions,  encourage  the  attendance  of  buyers  at  meetings;  others  urohibit  it; 
the  majority,  hov/sver,  mai.e  no  declaration  on  the  matter. 

Those  who  are  uninitiated  in  tns  worlc  of  open  price  associations  would 
naturally  suppose  that  the  chief  topic  of  discussion  in  meetings  is  prices.  The 
truth  seems  to  be  that  prices,  themselves,  are  not  so  much  discussed  as  are,  firsfc, 
the  circumstances  attendirig  the  quotation  of  certain  prices,  second,  the  condi- 
tions of  the  market  that  make  for  lower  or  higher  prices.  The  reason  for  the 
apparent  anomaly,  tnat  prices  themselves  are  not  discussed  to  any  extent  in  em 
open  price  meeting,  is  that  this  infor.nation  is  imparted  to  the  membership 
tnrough  the  reporting  system.  Members,  therefore,  already  knov/  what  prices  have 
been  charged,  and  they  come  to  the  meetings  to  find  out  why  prices  are  as  they 
are,  and  to  learn  what  the  business  outlook  is  in  order  that  they  may  put  them- 
selves in  a position  to  intelligently  quote  future  prices.  An  examination  of  the 
mixiates  of  all  the  group  meetings  of  the  American  Hardwood  Manufacturers’  Associ- 
ation for  the  year  1S19  discloses  only  three  references  to  the  prices  of  specific 
items^of  lumoer,  and  two  of  these,  by  the  way,  were  made  by  non-members  of  the 
pxan.  UndouDtedly  there  is  a temptation  to  discuss  future  prices;  it  is  there- 
fore gene-rally  provided  that  counsel  be  present  at  meetings  to  see  that  discuss- 
ions are  confined  to  strictly  lawful  a’ubject  ratter. 


■^’Constitution,  Art.  7,  Sec.  3. 

2 . 

Goods  tlan-ofacturers  of  America,  Const ifut ion,  Art.  8.  Anerican  Hardwood 
i.aivufacturers’  Association^ Record,  Anierican  Col-urn  & L'omber  Co.  vs.  U.  S.  Yol. 

, p.  1104;  Society  of  Manufacturing  Confectioners,  Constitution,  Art.  5. 

Steel  Barrel  lan^ofacturers’  Association,  Letter,  Jan.  20,  1921. 

See  Record,  American  Col.  & Lumber  Co.  vs.  U.  S. , Yol.  1,  p,  100. 


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68 


The  Eddy  associations  appear  to  ’ce  very  scraptiloas  in  avoiding  discuss- 
ion tliat  might  he  construed  to  he  in  violation  of  the  law.  iiinong  organizations 
that  have  not  come  under  the  influence  of  Mr.  Edd^r  or  his  lieutenants  less  vigi- 
lance in  this  respect  is  not  infrequently  displayed.  The  following  quotation 
illustrates  the  kind  of  discussion  which  is  permitted  hy  many  so-called  or;en 
price  associations  hut  which  wovdd  not  he  tolerated  hy  an  Eddy  Association; 

" As  showing  the  utility  of  the  Price  Exchange  Plan,  a price  was  taken 
from  the  first  report  presented  and  was  stated  to  the  memhers  present  for  their 
opinion.  The  merchandize  concerned  was  a 176-needle  lialf  hose,  15  ounce,  with 
looped  toe,  sold  at  $1.15.  It  was  the  opinion  of  all,  including  several  York 

selling  agents  who  were  present  as  gu.es ts  that  the  nrice  was  too  low,  and  one 

1 

selling  agent  stated  tliat  the  price  should  he  $1.35.  ” 

Reference  to  the  minutes  of  a typical  Eddy  Association  shows  that  aem- 

2 

hers  are  not  even  permitted  to  act  as  a body  in  standardizing  terms  of  p)ayment. 

In  as  much  as  terms  of  payment  are  an  integral  part  of  price,  a united  effort  to 
fix  terms  would  he  just  as  illegal  as  a united  effort  to  fix  the  prices  themselves 
Apparently  this  fact  is  not  recognized  among  many  associations  because  the  prac-' 
tice  of  standardizing  terms  is  exceedingly  p)revalent. 

In  general  the  chief  features  of  a.a  open  price  meeting  program  as  con- 
ducted by  the  typical  Eddy  associations  may  he  sumirarized  as  follows;  first,  a 
meeting  of  the  execu.tive  committee,  followed  hy  a meeting  of  the  association; 
second,  the  transaction  of  all  routine  business;  third,  discussion  of  questions 
touching  on  the  details  of  past  transactions  such  as  reasons  for  quoting  certain 

T 

X • 

Account  of  a meeting  of  the  Pennsylvania  Division  of  the  national  Association 
of  Hosiery  & Underwear  I.’anufacturers.  Textile  World  Journal,  Oct.  20,  1917,  p.73. 
3 » 

The  Drill  and  Reamer  Society;  Mnutes  of  Meeting,  June  11,  1920. 

Particularly  so  in  the  lumber  industry,  see  American  Lumberman,  Dec.  22,  1317, 
Uov.  3,  1917,  Oct.  20,  1917. 


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1 

pric6s,  mstiiods  of  figuring  costs,  suid.  tli6  liksj  lonrtli,  tii6  li63,riiig  of  rOjjOrts 
from  each  memter  regarding  general  conditions  in  the  industry. 

The  device  which  the  Eardwocd  fianufacturers’  Association  adopted  for 
making  the  round  robin  discussion  of  market  conditions  most  effective  is  wortljy 
of  s'oscial  comment.  Prior  to  the  holding  of  the  monthly  meetings  a questionaire 
was  sent  to  each  member.  The  following  ($esticns  were  contained  in  the  question- 
aire: 

1.  "Prom  what  class  of  crastomers  are  your  inquiries  coming  and  what  per 
cent  of  your  total  inquiries  conis  from  each  class? 

2.  "Prom  what  class  of  customers  are  your  orders  coming  and  what  per  cent 
of  your  total  orders  come  from  this  class? 

3.  "Check  off  from  the  following  list  how  long  it  would  take  you  to  ship 
out  the  total  orders  on  hand  working  under  normal  conditions,  and  assuming  tliat 
all  orders  you  have  on  your  books  are  ready  for  shipment? 

4.  "TJhat  is  your  total  production  of  liardv;oods  during  the  month  of  ...  . 

What  do  you  estimate  your  production  will  probably  be  for months? 

5.  "Y?hat  is  yov.r  total  present  stock  of  hardwoods,  sold  and  unsold?  What 
part  of  your  present  stock  of  hardwood  is  unsold? 

6.  "Are  your  labor  conditions  any  different  from  30  days  ago?  Are  they 
bettor  or  v;orse?  What  caused  the  change,  if  any? 

7.  "How  is  the  car  supply  at  the  present  time;  better  or  worse,  as  compared 
with  30  days  ago?  What  per  cent  of  your  requirements  are  you  getting? 

6.  "How  are  your  collections?  Are  they  better  or  worse  as  compared  v/ith  30 
days  ago? 

9.  "What  per  cent  of  normal  for  this  time  of  the  year  is  your  present 

supply  of  legs  banked  ahead  of  the  mill? 

l.See  Textile  World  Journal,  Jan.  13,  1917.  p.  109. 

2 

Transcripts  of  Minutes  of  Meetings  of  the  AiXierican  Hardwood  Manufacturer’s 
Association  may  be  found  in  the  Appendix.  See  E^ib.  No.  2. 


\ bkU  • 


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70 


10.  "Do  you  expect  to  'ce  shut  down  w'ithin  the  next  few  months  on  account 
of  the  shortage  of  logs,  or  for  any  other  reason?  If  sc,  please  state  how  long 
mill  '^11  he  idle. 

11.  "V/hat  is  your  view  of  market  conditions  for  the  next  few  months?  \7hat 

T_ 

is  the  general  outlook  for  business?  State  all  reasons  for  your  conclusions." 

A summary’’  of  the  replies  received  under  each  headvias  prepared  oy  the 
lianager  of  Statistics  and  the  results  were  made  the  oasis  of  discu-ssion  at  “foe 
next  group  meetings,  each  memher  present  being  called  upon  in  turn  to  express  his 
point  of  view  with  reference  to  each  question  as  it  came  up  for  discussion. 
Gathered,  as  they  were,  from  a substantial  part  of  the  whole  industry,  these  data 
when  p)roperly  s'amoarized  gave  a birds-eye  view  of  the  industry’’,  which  when  re- 
enforced by  an  open  aiid  free  discussion  in  meetings,  proved  a great  aid  to  mem?* 
bers  in  securing  remedies  for  conditions  that  were  unsatisfactory. 

It  is  peculiarly  characteristic  of  the  open  price  meeting  that  dis- 
cussions, instead  of  being  of  a rambling,  discorniected  nature  and  leading  to  no 
definite  end,  are  calculated  to  give  each  member  a perspective  of  the  industry 
as  a whole  to  the  effect  that  he  may  direct  his  individual  business  efforts  in 

consor.ance  with  those  of  all  the  others  in  ffuch  a way  as  to  inure  to  the  greatest 
2 

■orofit  of  all. 


1. 

Affidavit  of  F.  R.  Gadd,  Record,  American  Column  d Lumber  Co.  vs.  U.  S. , Vol. 

2,  p.  1101. 

2. 

For  a copy  of  a typical  open  price  constitution,  see  Appendix,  Exhib.  3» 


■jfc  •■■Tn  ■■ 


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71 


CHAPTER  V 

THE  REPORTING  PLAN 

Barring  the  work  done  at  meetings,  the  reporting  system  covers  most  of 

the  activities  ordinarily  engaged  in  by  open  price  associations.  Since  no  two 

industries  use  the  same  method  in  marketing  their  output  there  will  be  found 

points  of  difference  in  every  reporting  plan;  however,  these  plans  readily  group 

themselves  into  two  broad  classes;  one  pertains  to  manufacturers  who  produce 

goods  sold  to  Jobbers  and  retailers,  the  other  to  manufacturers  who  make  goods 

only  to  suecification,  each  contract  differing  more  or  less  from  all  others  and 

1. 

calling  for  ^ecial  bids  and  prices. 

REPORTING  AMONG  14 NUEACTURERS  ^10  MAKE  GOODS  TO  SPECIFICATION. 

Variations  in  plans  among  this  group  of  manufacturers  are  less  pro- 
nounced than  they  are  among  the  other  group.  Mr.  Ed^jy  evidently  had  chiefly  the 
class  of  contracting  manufacturers  in  mind  when  hem'Ote  his  book,  for  only  pass- 
ing notice  is  given  to  the  class  of  manufacturers  that  sells  to  Jobbers  and 

2. 

dealers.  Briefly  outlined,  tSr.  Eddy’s  plan  as  presented  in  his  book  calls  for 
the  filing  by  members  of  all  intpiiries  received,  all  bids  made,  and  all  contracts 
awarded.  Under  this  plan  the  secretary  does  not  permit  the  information  contained 

in  the  reports  of  inquiries  to  be  interchanged  among  members  for  the  reason  that 

3. 

there  would  be  a strong  temptation  for  members  to  resort  to  collusive  bidding. 

The  reports  of  inquiries  are  used  to  make  a weekly  bulletin  containing  statis- 
tical Information  throwing  li^t  on  the  volume  of  work  in  project,  as  well  as 
the  general  character  of  the  work.  The  secretary  interchaacges  all  bids  as  re- 
ceived among  those  who  have  bid  on  a given  piece  of  work,  provided  that  all  have 
— - 

Eddy,  A.  J.  9ew  Competition  , p.  123. 

2*  Ibid. , p.  123. 

’Ibid.,  p.  128. 


7 


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I 


72 


filed  copies  of  their  bids  and  have  not  narked  them  "sealed".  Those  who  have  not 
filed  copies  of  their  bids  get  no  Infonaation  concerning  the  bids  of  the  others. 
If  a member  sends  in  a bid  marls  d "sealed"  the  secretary  will  retain  it,  and  no 
information  regarding  that  bid  will  bo  sent  to  other  members  until  after  the 
contract  is  awarded,  whereupon  all  bids  are  opened  for  discussion.  The  mem'oer 
who  marks  his  bid  "sealed"  gets  no  information  regarding  other  bids.  Apparently 
the  reason  for  a provision  calling  for  "sealed  bids"  is  to  induce  the  ^eptlcal 
to  try  out  the  open  price  plan  by  giving  them  the  right  to  file  bids  sealed  if 
they  so  desire;  in  time  they  drop  the  practice  because  it  offers  no  advantages. 

No  bidder  is  bound  to  adhere  to  the  bid  that  he  has  filed.  After  ascertaining 
the  bids  of  others  he  is  free  to  lower  his  own  bid  to  secure  the  work,  but  he 
must  immediately  file  all  charges  so  as  to  give  other  bidders  opportunity  to  re- 
vise their  bids  if  they  care  to  do  so.  The  final  report  sent  out  to  the  bidders 
by  the  secretary  is  a copy  of  the  contract  as  finally  awarded.  This,  in  brief, 

constitutes  the  reportirg  system  as  laid  down  by  Eddy  for  this  class  of 

2. 

manufacturers. 

How  closely  have  open  price  associations  followed  the  plan  laid  down 

by  Mr.  Eddy?  At  any  rate,  among  chose  associations  for  which  Mr.  Eddy*  s suc- 

3. 

cessor  is  counsel,  there  appears  to  be  one  pronounced  deviation.  This  per- 


1. 

The  Bridge  Builders'  Society  started  this  plan  but  soon  dropped  it.  See  testi- 
mony of  J.  S.  Dean,  Eecord,  U.  S.  vs.  United  States  Steel  Corporation,  Vol.  2, 
p.  797. 

Eddy,  A. J.  New  Competition  , chap.  VI. 

3. 

J/Ir.  J.  W.  Mathews,  Mr.  Eddy's  successor,  is  counsel  for  the  following  associa- 
tions organized  by  I*!ir.  Eddy:  Bridge  Builders  and  Structural  Society;  Hng 

Travellers*  Society;  Hot  Eoll  Strip  Steel  Society;  Institute  of  I4*kers  of 
Explosives,  Dynamite  and  Gun  Powder;  Bolt,  Nut  and  Eivet  Society;  Cold  Boll 
Sti'ip  Steel  Institute;  Wire  Pence  ^.manufacturers;  National  Association  of 
Finishers  of  Cotton  Fabrics.  See  Hearings  before  Joint  Legislative  Comnittee 
on  Housing,  New  York  City,  N.  Y.  Dec.  28,  1920.  Becord  p.  4602. 


L'4. 


\ TXjrvsr, 

I 


taln3  to  the  niatter  of  inquiries.  In  his  testimony  before  the  New  York  Joint 
Legislative  Committee  on  Housing,  Mr.  Eddy’s  successor  stated  that  none  of  the 
associations  with  Whidi  he  was  connected  made  reports  of  inquiries.  He  could 


73 


not  explain  #iy  this  feature  had  not  been  adopted  by  Mr.  Eddy  when  he  organized 

1. 

these  associations.  Perhaps  he  feared  that  outsiders  might  come  to  the  con- 
clusion that  inquiries  were  being  reported  in  order  to  accomplish  collusive  bid- 
ding. Undoubtedly  members  could  inqprove  their  position  with  this  information  at 
hand  without  resorting  to  collusive  bidding.  Such  reports  would  throw  a light 
on  the  volume  of  work  in  prospect.  If  they  sho'A«d,  for  example,  that  a large 
volume  of  work  was  pending,  members  would  be  careful Inot  to  contract  to  capacity 
for  low  priced  work  and  a stiffening  of  prices  would  tndcubtedly  come  about  in 
shorter  time  than  might  othei^vise  have  been  the  case. 

The  other  features  of  the  Eddy  plan  for  this  class  of  manufacturers 
have  been  adopted  in  their  general  outlines.  Variations  in  the  detailed  work- 
ings of  the  plan  are  of  course  to  be  found.  The  procedure  in  vogue  among  the 
Pressed  Metal  Manufacturers  may  be  regarded  as  typical.  Copies  of  bids  are 
mailed  to  the  office  of  the  cortimissioner  where  all  bids  are  arranged  in  a file 
accordlrjg  to  the  names  of  the  prospective  customers.  If  within  a period  of 
two  months  no  other  bids  are  received  on  the  sairie  contract  it  is  assuDied  that 
no  conpetitive  bids  were  made.  As  soon  as  the  records  show  that  two  members 
have  quoted  on  the  same  contract,  a report  is  made  out  on  a fora  provided  for 
the  purpose,  showing  the  names  of  members  quoting,  the  part  number  quoted  on, 
rate  per  thousand  for  parts,  and  the  charge  for  tools.  A copy  of  this  report 
is  mailed  to  both  members  quoting,  but  not  to  the  other  members.  If  one  of  the 
members  secures  the  order  he  makes  a report  of  it  to  the  commissioner,  who  in 
turn  relays  the  iriformation  to  the  unsuccessful  bidders.  At  the  r^ular  monthly 
meeting  a statistical  report  is  read  showing  the  number  of  hlds  which  have  been 

^’Testimony  of  J.  H.  Ma.thews  before  the  New  York  Joint  Legislative  Conmittee  on 
New  York  City.  N.Y..  Dec.  29.  1920.  Record  u.  4633. 


• i" 


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reported,  the  ntanher  which  are  competitive  and  the  nxunher  which  are  closed. 

In  the  case  of  the  National  Association  of  Finishers  of  Cotton  Fabrics 
the  members  report  daily  as  soon  as  made  every  quotation,  written  or  verbal,  giv- 
ing name  of  customer,  description  of  work,  quantity,  terms,  discounts,  "and  all 
inducements,  direct  or  indirect."  Each  week  each  member  files  with  the  secretary 
on  a blank  prepared  for  the  purpose  statistical  information  as  to  "quantity  of 
orders  in  pounds  or  yards  and  the  number  of  days  work  ahead".  The  secretary 
classifies  the  infoimation  received  and  maJoes  dally  and  weekly  reports  to  mem- 
bers, sending  the  summarized  reports  to  those,  only  , who  have  contributed  infor- 
2.  3.  4. 

mat  ion. 


The  Eddy  associations  make  an  exception  to  the  general  procedure  of 
reporting  as  illustrated  by  the  cotton  finishers  and  pressed  metal  manufacturers 
where  bidding  is  done  on  contracts  for  governmental  or  other  public  bodies. 

Where  work  of  this  kind  is  involved,  bids  are  not  exchanged  because  these  bodies 

will  accept  only  one  bid  from  each  bidder  and  that  bid  must  be  delivered  sealed 

5. 

and  is  to  be  opened  only  on  a specified  date  and  hour. 

An  interesting  deviation  from  the  plans  characteristic  of  the  Eddy 
associations  is  in  use  by  the  National  Bottle  Manufacturers'  Association.  In 
this  case  an  exchange  of  information  is  made  only  upon  the  request  of  some  member. 


'H.B.  Tosdal,  Open  Price  Associations  , American  Economilc  Review,  Vol.  VII.  No. 
2,  June  17,  1917,  p.  343. 

^’Ibld.  p.  342. 

3. 

Eor  facsimiles  of  a simple  card  system  in  use  by  manufacturers  who  bid  on  con- 
tracts, see  Aupendlx,  Exhibits  4,  5,  6. 

4. 

Eor  an  account  of  the  reporting  system  of  the  Bridge  Builders  and  Structural 
Society,  see  Record,  U.  S.  vs.  U.  S.  Steel  Corporation,  Vol.  II.  pp.  797-803. 
Eor  a general  description  of  the  Eddy  reporting  system,  see  testimony  of  J.H. 
Mathews  before  the  N.  Y.  Joint  Legislative  Committee  on  Housing,  Dec.  29,  1920, 
pp.  4630-4636. 


Ibid.  p.  4634. 


>«.a- 


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75 


The  member  desiring  the  exchange  of  information  fills  out  a specially  prepared 
form.  He  wants  to  know  two  things:  first,  what  prices  and  terms  have  been 
quoted  on  the  contract  in  v^ich  he  is  interested;  second,  vho  the  successful 
bidder  is  and  vdiat  prices  and  terms  he  has  made  to  secure  the  contract.  The 
customer's  name  and  address  are  shown;  a description  of  the  contract  is  given; 
and  the  bid  made  by  the  Inquiring  member  is  fully  described.  Upon  receipt  of 
this  inquiry,  the  secretary  sends  out  on  a prepared  foirc  a request  to  every 
member  for  information  bearing  on  this  contract.  Members  are  asked  to  state, 
first,  vihether  or  not  they  have  quoted  on  this  contract,  and  if  so,  what  terms 
weremiade;  second,  \«hether  or  not  the  order  was  received,  and  if  so,  on  what 
terms.  Members  reply  directly  on  the  forms.  The  secretary  compiles  on  another' 
prepared  fonn  the  information  received,  and  mails  it  to  the  members  '^o  have 
made  renorts  in  response  to  the  inqxilry.  The  result  is  that  these  members  secure 
the  following  information  about  the  contract  in  question:  first,  a full  descrip- 
tion of  the  terms  made  by  each  bidder  reporting;  second,  the  nama  of  the  success- 
ful bidder  and  the  terns  that  he  made,  including  price,  date  of  ship  ments , 
freight  allowance,  and  any  other  inducements,  direct  or  indirect.  The  only  name 
disclosed  by  the  secretary  is  that  of  the  successful  bidder.  The  names  of  the 

other  bidders  are  designated  by  letter.  Only  the  secretary  has  the  key  to  the 

1. 

lettering  sjrstem.  This  offers  one  illustration  among  many  that  might  be  given, 
of  the  secretiveness  that  persists  among  members  even  after  they  have  joined 
hands  in  an  open  price  association.  They  are  not  willing  to  disclose  their  names 
for  fear  that  a competitor  mi^t  work  them  an  injury. 


1. 

Tor  sample  copies  of  the  forms  in  use  by  the  National  Bottle  Manufacturers' 
Association,  see  Appendix,  Exhibits  7,  8,  9. 


e 


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76 


EEPOHTING  AMONG  MANIIFACTUEEES  ^^0  SELL  TO  JOBBERS  AND  RETAILERS 

The  biasiness  facts  most  cormonly  exchanged  among  this  class  of  manu- 
facturers are  those  relating  to  prices  and  terms  of  payment,  production,  orders, 
shipments,  stocks,  purchases,  manufacturing  and  selling  costs,  returned  goods, 
cancellations,  advertising  and  credits.  Some  of  this  information,  particularly 
that  relating  to  manufacturing  costs,  orders,  purchases  and  credits,  is  also 
exchanged  among  manufacturers  of  the  class  Just  described  but  the  practice  is 
less  common  than  it  is  among  the  class  that  sells  to  Jobbers  and  retailers. 

In  order  to  make  prices,  and  trade  and  cost  statistics  comparable  it 
is  in^jerative  that  the  goods  be  closely  graded  or  standardized.  It  will  accord- 
ingly be  found  that  an  amazing  degree  of  standardization  has  takem-place  among 
manufacturers  who  are  members  of  open  price  associations.  Of  course  standardi- 
zation in  many  instances  was  begun  long  before  open  price  work  was  contempla.ted 
because  of  other  numerous  advantages  of  having  standardized  commodities,  but 

certainly  the  open  price  movement  has  greatly  accelerated  progress  in  the  direc- 

1. 

tlon  of  standardization. 

A few  cases  are  found  vfeere  open  price  work  is  beirjg  done  in  a limited  | 
way  even  though  little  standardization  has  been  accomplished.  Some  industries 
do  not  lend  themselves  to  standardization  because  individuality  of  style  is 
sought  after  and  is  a strong  factor  in  competition.  One  of  these  industries  is 
the  textile  industry.  Open  price  associations  in  this  field,  notably  the  Woolen 
Goods  Exchange  and  the  Ehit  Goods  Manufacturers  of  America,  have  endeavored  to 
overcome  in  some  degree  the  difficulty  involved  in  securing  conrparahle  informa- 
tion, by  having  members  file  with  the  secretary  samples  of  the  goods  each 

manufacturer  is  marketing,  with  a price  tag  attached  to  each  sainple.  Members 

1. 

For  a good  example  of  standardization  see  form  for  reporting  prices  in  use  by 
the  Society  of  Manufacturing  Confectioners,  Appendix,  Exhibit  1C. 


77 


are  then  privileged  to  come  to  the  office  of  the  secretary  to  view  these  sainples?" 

A ■unique  method  which  aims  to  accomplish  the  same  pur'oose  is  in  ■u.se 
among  chair  man\ifact*arers . Each  man-ufacturer  mails  the  secretary  a photographic 
reproduction  of  each  style  of  chair  that  he  has  on  the  market  and  indicates  on 
the  face  of  the  photograph  the  price  that  is  "being  quoted.  The  secretary  pro- 
vides each  reporting  member  ’with  a copy  of  all  photographs.  Members  thereafter 
inform  him  of  all  changes  in  quotations  and  he,  in  turn,  instructs  the  member- 

p 

ship  to  change  the  price  indicated  on  the  photographic  plates  accordingly.  ’ Of 
course  this  plan  is  not  entirely  satisfactory  because  the  photographic  plates 
give  little  inkling  of  what  the  q’>Jiality  and  workmanship  may  be. 

Many  open  price  associations  confine  their  reporting  to  a selected  list 
of  products.  Newly  organized  associations  find  it  most  expedient  to  limit  their 
price  reporting  to  one  or  two  products  beca-use  of  the  difficulties  that  are  al- 
ways to  be  enco*untered  in  getting  the  work  on  a going  basis.  The  products  first 
chosen  are  those,  usually,  which  are  the  eaaiest  to  standardize  and  the  most  com- 
petitive in  character.  After  an  organization  for  price  reporting  has  been  built 
up,  it  becomes  relatively  easy  to  add  other  products  to  the  list.  The  members  of 
the  Woolen  Exchange,  for  example,  began  reporting  (July  1,  1916)  only  on  staple 
men  s wear  and  broadcloths;  these  goods  were  the  most  competitive  and  were  s'uf— 
ficlently  uniform  in  grade  to  enable  price  comparisons  to  be  made.  Soon  ■uniform 
cloths  were  added.  These  were  followed  hy  a considarahle  line  of  women's  wear 

3 

fabrics  and  toward  the  end  of  that  year  several  lines  of  f.ancy  goods  were  added. 
Members  of  the  American  Hardwood  Manufacturers'  Association  began  reporting  one 
species  of  wood  only,  namely  oak,  which  ms  most  widely  produced.  This  was  in 

^'Textile  World  Journal,  Jan.  13,  1917,  n.  60. 

2. 

For  sample  copy  of  a photographic  plate,  see  Appendix,  Exhibit  11. 

3 • 

Textile  World  Joume.l,  Apr.  8,  1916;  Jan.  13,  1917. 


vs"" 

1917.  By  3919  practically  all  the  sonthem  hardwoods  of  any  irnnortacce  were  being 
reported.  Some  ind-ustries  probably  never  can  be  standardized  sufficiently  to 
permit  all  of  its  products  to  be  reported.  It  would  seem  almost  inpossible,  for 
example^ to  introduce  price  reporting  in  any  comprehensive  way  in  the  dry  goods 
trade,  vihere  styles  are  almost  innumerable. 

Among  the  class  of  manufacturers  viho  cater  to  jobbers  and  retailers  the 
greatest  differences  ;^revall  as  to  the  amount  of  Information  that  is  exchanged. 

A few  are  so  open  in  their  exchange  that  each  member  kno’vs  practically  all  about 
the  business  of  every  other  member.  (This,  of  course,  could  only  be  true  of  some 
of  the  smaller  associations.)  Others  do  little  more  than  exchange  price  lists. 

The  reporting  system  may  be  the  simplest  imaginable  or  it  may  be  extremely  elabo- 
rate. The  Ohio  State  Millers'  Association,  for  example,  only  requires  its  mem- 
bership to  fill  out  a card  once  a week,  Indicating  the  sales,  output,  and  pur- 
chases for  the  week,  and  stock  on  hand  at  the  time  of  reporting.^*  All  that  a 
small  group  of  lumbennen  in  Mississippi  do  is  to  mail  to  their  statistical  bureau 
in  Hattiesburg  a typewritten  carbon  copy  of  the  orders  received  for  the  day.^' 

The  secretary  sends  out  at  irregular  intervals  a mimeographed  statement  of  the 
sales  reported.  No  other  iriformation  is  exchanged.  In  contrast  to  this,  the 
plan  of  the  American  Hardwood  Manufacturers ' Association  called  for,  first,  the 
filing  of  a price  list  at  the  beginnire  of  each  month,  second,  a daily  report  of 
sales,  to  be  an  exact  copy  of  orders  taJsen,  third,  a daily  report  of  shipments, 
to  be  an  exact  copy  of  the  invoice,  fourth,  a monthly  report  of  stocks,  classified 
hy  grade,  kind  and  thickness,  fifth,  a monthly  production  report  classified  hy 
grades  and  thicknesses,  and,  sixth.  Inspection  reports.  The  secretary,  of  course, 

^ Reporting  Plan,  American  Col.  and  Lumber  Co.  vs.  U.  S.,  Record,  Vol.  I.  p.  81. 

'A  sample  card  my  be  seen  in  the  Appendix,  Ibdiihit  12. 

3 • 

See  sample  copy,  Appendix,  Exhibit  13. 


79 


1 


compiled  this  information  and  mailed  it  to  memhers  either  in  the  form  of  reports 

1. 

or  incorporated  as  a part  of  a afeekly  hulletin.  Enough  has  been  said  at  this 
point  by  way  of  illustration  to  indicate  the  wide  range  of  difference  existing 
between  associations  as  to  the  amount  of  detail  that  members  report.  Eurthsr 
illuatratians  will  arise  in  connection  with  the  succeeding  discussion  of  re- 
ports in  use  among  the  various  associations.  Eirst  will  be  considered  reports 
in  use  in  the  exchange  of  price  information;  second,  those  used  in  recording 
cost,  trade  and  other  statistics. 

Open  price  associations  do  not  all  follow  the  same  method  of  report- 
ing prices.  Each  of  them  has  sought  to  work  out  a method  v*iich  would  yield  the 
maximnm  returns  with  Ihe  least  expenditure  of  energy.  Most  associations,  ho'w- 

ever,  can  be  placed  in  one  of  two  great  groups.  In  one  the  practice  is  to  ex- 

2. 

change  price  lists  either  between  the  members  themselves,  or  through  the 
medium  of  the  secretary.  Ibis  procedure  is  s-upplemented  by  the  reporting  of 
such  tramsactions  as  involve  prices  made  at  variance  with  these  price  lists. 

In  the  other  group  the  practice  is  to  exchange  price  information  based  only 
upon  actual  transactlom . 

The  associations  which  have  chosen  the  method  of  filing  a price  list 
and  reporting  only  varla,tlons  therefrom  have  usually  been  those  vhose  products 
command  a price  which  is  stable  for  a conparatively  long  period  of  time,  as  is 
the  case,  for  example,  in  the  woolen  and  knit  goods  lines,  or  the  furniture 
line,  liiere  certain  prices  are  announced  at  the  beginning  of  the  season  and 
remain  apuroximately  at  those  figures  daring  the  remainder  of  the  season. 
Obviously  time  and  energy  are  saved  in  avoiding  the  reporting  of  numerous 

1. 

Eeporting  Plan,  American  Col.  and  Lumber  Co.  vs.  U.  S.,  Record  Vol.  I,  pp. 

82-  86. 

2. 

Little  information  is  available  as  to  the  prevalence  of  this  practice.  Mem- 
hers of  the  National  Photo,  Engravers  exchange  price  lists  among  themselves 
in  small  groups  in  certain  localities. 


lol 


transactions  where  prices  charged  are  Identical  with  those  shown  on  the  :prlce 
list.  On  the  other  hand,  not  being  accustomed  to  report  all  sales,  members  are 
likely  to  neglect  to  report  such  prices  as  are  made  at  variance  with  those  on 
their  list.  In  order  to  avoid  this  contingency  to  some  extent,  as  well  as  to 
prevent  misunderstandings  as  to  '.vhat  may  be  the  active  prices,  some  associations 
provide  that  each  member  must  fils  a new  price  list  at  regularly  recurring  in- 
tervals; others  provide  that  a new  price  list  must  be  filed  every  time  a 
member  issues  one  to  the  trade.  ’ 

associations  that  are  interested  in  products  for  which  the  market  is 
a fluctuating  one  are  likely  to  line  up  with  the  group  ';ifoich  requires  its  mem- 
bers to  report  actual  transactions.  The  other  scheme  would  not  work  well 
where  the  market  is  a fluctuating  one  because  a price  list  issued  one  day  might 
be  obsolete  the  next.  But  also  in  this  group  there  are  associations  vdilch  at- 
tempt to  secure  maximum  results  for  effort  expended  by  eliminating  certain 
transactions  from  their  reporting  system.  The  Linseed  Crushers'  Council,  an 
open  price  assodiatlon  operatii^  under  the  direction  of  the  Armstrong  Bureau  of 
Belated  Industries  requires  that  members  report  only  carload  sales.  It  is  not 
felt  that  sales  of  less  amount  have  any  material  effect  on  the  market.'"’  The 
Leather  Belting  Exchange  requires  its  members  to  mail  copies  of  all  invoices 

to  the  secretary,  hut  only  those  above  $60.00  are  listed  in  the  secretary's 
4. 

report  to  members. 


1. 


2. 

3. 


4. 


Reporting  Plan,  Fnit  Goods  Manufacturers  of  America,  Textile  World  Journal 
May  19,  1917. 

Reporting  Plan,  Constitution,  Society  of  Manuf acturlng  Confectioners. 

Bill  of  Complaint,  U.  S.  vs.  American  Linseed  Oil  Co.  st  al. 

Spaulding,  W.V.,  Experiences  in  Cooperative  Competition  , u.6;  also  Tosdal, 
• R. , Open  Price  Associations  , Am-erican  Economic  Review,  p.  346. 


81 


There  seems  to  "be  very  little  variation  in  the  plans  of  those  associa- 
tions v-vhich  provide  for  the  filing  of  price  lists,  fis  previo-usly  intimated  they 
are  filed  either  at  regular  or  irregular  Intervals.  The  Knit  Goods  Manufacturers 
of  America  require  that  price  lists  be  filed  at  least  once  every  three  months, 
and  if  price  changes  become  very  active  members  are  urged  to  file  price  lists 
more  frequently.  Usually  price  lists  are  reported  on  specially  prepared  forms. 
Price  variations  are  to  be  reported  as  soon  as  made.  Prepared  forms  are  not  so 
frequently  provided  for  this  purpose;  quite  commonly  this  information  is  simply 
conveyed  by  letter.  The  secretary  immediately  relays  the  information  to  the 
other  members . 

Variation  in  practice  Is  greater  among  the  associations  that  require 
reports  covering  nothing  but  actual  transactions.  Practically  all  of  the  lumber 
manufacturers'  associations  require  a daily  report  of  sales.  In  the  case  of  the 
American  Hardwood  Manufacturers'  Association  the  members'  daily  report  showed 
all  sales  and  cancellations  made  that  day,  and  these  reports  were  to  be  exact 
copies  of  orders  taken,  and  to  include  all  sales,  large  or  small,  as  well  as  all 
special  agreements  of  every  kind  in  reference  to  price,  grade  or  terms.  The 
West  Coast  Lumbermen's  Association  requires  that  all  be  reported  dally  and 
they  roast  be  consecutively  numbered  and  be  submitted  in  affidavit  form.  Members 
of  the  Northern  Hemlock  and  Hardwood  Manufacturers'  Association  sign  a weekly 
statement  to  the  effect  that  they  are  reporting  all  sales  that  have  been  made 
during  the  week.  Members  of  the  North  Carolina  ’^Ine  Association  axe  not  re- 
quired to  si,gn  an  affidavit  in  connection  with  the  submittel  of  daily  sales  re- 
ports; they  do  not  even  sign  their  names,  but  fill  in  the  number  by  viiich  they 

1. 

Constitution,  Article  10,  Section  7. 

2. 

Peporting  Plan,  Record,  Ajnerlcan  Col.  and  Lumber  Co.  vs.  U.  S.,  Vol.  I,  p.  82. 


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82 


are  identified  in  the  secretary’s  office.^’  In  contrast  to  this  members  of  the 
Steel  Barrel  Ii/ian'ofacterers*  Association  sign  a statement  prirt  ed  on  the  dally 
sales  report  tliat  reads  as  follows:  "The  report  above  is  atme  and  conp/lete 

report  of  all  sales  made  this  day,*  * ♦ which  we  pledged  to  report  and  develops 
every  feature  of  such  sale  without  any  omissions  as  to  concessions,  rebates,  or 
allowances  that  have  been  made  either  directly  or  indirectly.  Trie  Armstrong 

Bureau  has  evolved  an  unusual  arrangement  for  quickly  conn.unl eating  mai^^et  in- 
formation to  the  linseed  oil  manufacturers.  The  latter  are  instructed  to  send 
telegraphic  reports  of  price  clianges  to  the  bureau.  They  are  sent  in  code  in 
order  to  save  expense  and  are  immediately  relayed  to  all  members  in  coded  fom. 
The  price  of  linseed  oil  moves  in  harmony  with  the  price  of  linseed.  The  price 
of  linseed  fluctuates  almost  dally.  In  order  to  keep  properly  informed  of  the 
trend  of  the  market  it  is  found  necessary  to  report  by  telegram.  In  contrast 
to  this,  members  of  some  associations  aim  to  keep  only  roughly  informed  of  the 
trend  oftlae  market.  Members  of  the  United  States  Potash  Producers'  Association^ 
for  example,  turn  in  a combined  production  and  sales  report  only  once  a month?’ 
Other  associations  are  either  content  to  learn  only  the  approximate  irend  of 
the  marxet  or  sales  are  so  few  and  fluctmtions  so  Insignificant  that  it  is  not 
deemed  necessary  to  require  members  to  report  ^es  oftener  than  once  a week. 
I.femoers  of  the  News  Print  Service  Bureau  report  weekly  sales  on  a card  about 

the  size  of  a blotter.  Export  and  domestic  sales  are  shown  separately,  as  are 

4, 

and  less  than  carload  sales. 


1. 


^For  a copy  of  sales  report  submitted  by  members,  see  Appendix,  Exhibit  14. 
See  copy  of  sales  report,  Appendix,  Exlilbit  IS. 

See  copy  of  report  in  Appendix,  E:diiblt  18. 

See  copy  of  report  in  Appendix,  Exhibit  19. 


3. 


4. 


83 


Eespecting  the  excliange  of  price  inforraatlon,  there  reiiiains  to  be  die- 

cusaed  what  kinds  of  reports  are  submitted  by  secretaries  to  the  raerabership. 

Here,  too,  variations  are  very  pronounced.  They  may  be  made  by  telegraph,  • as 

2 ^ *** 

previously  stated,  or  they  may  be  mailed  daily,  weekly,  or  monthly,  in  type- 

written,  mimeographed,  or  printed  fom.  Hot  a single  case  :ias  been  found 

where  the  secretary  is  permitted  to  report  the  names  of  customers.  The  American 

Hardwood  Maiiufactvjrers'  Association  planned  to  liave  this  feature,  but  it  was  not 

adopted  because  members  objected  to  divulging  the  names  of  their  customers.^* 

Some  reports  show  the  appr-cximate  destination  of  shipments.  The  daily  sales 

report  issued  by  the  secretary  of  the  Steel  Barrel  I^Ianrafacturers'  Association 

e. 

shows  the  state  wherein  the  sales  are  made.*”  The  weekly  reuort  of  the  Ohio 

10 . 

Mllera’  State  Association  shows  the  town  or  city.  The  American  Hardwood 
..toifacturars’  Association  reports  designate  the  territory  in  which  sales  are 


1. 


3. 


4. 


7. 


8. 


9. 


10. 


The  Linseed  Crtishers*  Council, 

For  inst^ce,  Steel  Barrel  Itoifacturers’  Association;  Hbrth  Carolina  Pine 
so  elation;  West  Coast  Lumbermen’ s Association. 

For  instance,  Ohio  State  Ihllers’  Association;  National  Box  and  Shook  Lfeinufac- 
taz’ers  Association;  Newsprint  Service  Bureau;  Llaster  Dyers’  Excliange  of  New 
iLngland;  American  Hardwood  Manufact^ore/s’  Association. 

For  instance.  Tool  Steel  Society. 

For  instance,  Lumberm.en’ s Statistical  Bureau. 

tion^^'^^^^^’  Lumbermen’s  Association;  Ohio  State  liillers’  Associa- 

» 

For  instance,  American  Hardwood  Manufacturers'  Association;  North  Carolina 
rine  Association. 

Eecord,  AiLerlcan  Col.  and  Lumber  Co.  vs.  U.  S.  Yol.  2,  p.  1107. 


See  copy  of  sales  report.  Appendix,  Exhibit  17. 
See  copy  of  sales  report.  Appendix,  Exhibit  20. 


- ' ■ 


I 6 ■- 


IP* 


84 


niade  oy  the  nearest  city.  The  West  Coast  Lmobemen’ s Association  and  the 
National  Box  aiid  Shook  thniifacturars’  Association  reports  give  no  clue  whatever 
regarding  tne  destination  o£  Siiipments.  Soiae  reports  do  di'^mlge  the  names  of 

3 • f 

seilers,  otners  indicate  the  name  of  the  seller  by  code  number  or  letter  only, 
and  still  others  give  no  clue  whatever  to  the  identity  of  the  seller.  The 
secrewary  alone  knows  t he  identity  of  each  seller  rep>resented  by  a code  ntuiToer. 
The  use  of  the  code  number  does  serve  a purpose  to  the  other  members,  however. 
In  case  conditions  surrounding  soi®  ijarticnalar  s ale  seem  to  any  member  to  be  un- 
reasonable, he  is  given  the  privilege,  in  some  associations  at  least,  of  taking 
tne  matter  up  with  the  secretary.  The  member  comnunicates  the  code  iromber  to 
the  secretary,  who  in  turn  will  communicate  with  the  mianufacturer  bearing  this 
code  number,  and  without  divulging  the  identity  cf  either  the  seller  or  the  in- 
quirer, reports  to  the  inquirer  any  special  circumstances  which  may  have  sur- 

, , 5. 

rounded  zne  sale  tending  to  explain  any  unus^^al  conditions. 

Secretaries  do  not  al\mys  report  each  individual  sale  even  though 
members  may  have  done  so.  The  secretary  of  the  West  Coast  L'ombermen’s  Associa- 
tion is  furnished  with  a daily  report  of  sales,  but  the  report  tliat  he  issues 
show's  the  total  volume  of  sales,  the  low,  high,  aiid  the  "prevailing”  price, 
covering  a period  of  three  or  four  days  at  a time.  One  secretary  reports, 

See  copy  of  sales  report.  Appendix,  lichibit  21. 

3 ♦ 

Bor  instaiice,  jsmerican  Hardwood  Manufacturers'  Association;  National  Chair 
i/an-ofacturers*  Association. 

3. 

Steel  Barrel  Itoufucturers'  Association;  North  Carolina  Pine  Association. 

Bor  instaiice,  West  Coast  Lumbermen’s  Association.  The  National  Box  and  aiook 
i^anufact-^ers'  Asscclaticn  report  shows  no  names  of  sellers,  but  Indicates  the 
numoer  of  sellers  vdio  have  reported. 

5. 

^auldi::!g,  W.V.,  Experiences  in  Cooperative  Coimpetition,  u.  5. 

6.  > -u 

See  copy  of  report  in  Appendix,  Exhibit  22. 


85 


monthly,  a list  of;i”rj.ling  prices  that  Iriave  ‘oeen  quoted  in  the  r:a.rlcet”. The 
secretary  of  the  Steel  Tool  Society  reports  only  the  total  number  of  oounds  of 
each  id.nd  of  steel  sold  at  each  price.  A similar  scheme  is  in  use  i:i  the  Master 
I)^'-ors'  Excliange  of  New  England.  Finally  several  associations  provide  for  the 
contingency  v;here  man-ofacturers  sell  both  to  johhors  aiid  retailers  oy  getting 
out  sales  reports  with  two  sections  to  them,  one  devoted  to  retail  prices,  the 
other  to  wholesale  p.rices.^‘ 

lu  wij-1  ce  seen  from  tne  foregoing  tl'.at  the  exchange  of  price  infoxma- 
ticn  is  a mnst  important  function  of  open  price  associations.  However  there  are 
those  viho  contend  that  if  cost  systems  could  he  standardized  so  that  each  ffiemher 
might  ioiow  his  costs,  there  would  he  nc  need  of  exclianging  price  informat  inn. 
Those  who  malce  this  assertion  apparently  are  act-uated  hy  the  theory  that  the 
proper  price  is  that  oased  on  cost  plus  a reasonable  profit.  Itiany  manufacturers 
feel,  nowever,  tliat  because  of  the  recurring  waves  of  prosperity  and  depression 
to  which  the  industrial  world  is  subject,  they  must  in  time  of  prosperity  create 
a cusnion  of  profits  witn  which  to  ah  sorb t he  losses  which  come  in  times  of  de- 
pression. In  other  words  they  xaust  at  all  times  seek  to  get  the  price  that 
xe w conod lens  will  pei’mit  them  to  secure.  Open  price  associations  are  there- 
fore not  content  to  limit  theiractivities  to  the  exchange  of  cost  information. 

It  is  conceivaole  that  members  mi^t  be  able  to  secrure  the  maximum 
price  consistent  with  icarket  conditions  without  exchangirg  information  about 
prices,  if  statistics  of  production,  orders,  shipments  and  stocks  could  be  assem- 
bled, compiled,  and  disseminated  in  such  a way  as  to  be  representative  of  t he 
whole  industry,  and  at  the  same  tin^e  be  intelligently  acted  upon  by  each  manu- 
facturer in  the  industry.  Hut  because  of  the  many  difficulties  that  sW.d  in  the 

T.  ~ 

i.to^acturers‘  Excliange.  See  copy  of  report.  Appendix,  2x- 

2. 

fhis  is  done  oy  the  Knit  Goods  llanufacturers  of  America  and  Tool  Steel  Society. 


86“ 


way  of  achieving  such  a goal,  associations  have  "been  content  to  arrive  at  ai;  ap- 
proxirrate  estiinats  of  the  trend  of  the  uarket  hy  talcing  the  easier  course  of 
simply  exchanging  information  about  prices,  iliany  associations  have  as  yet  at- 
teuj/ted  nothi]^  more.  Associations  which  represent  industries  in  which  the  num- 
her  of  cora^etitors  is  conparatively  small  succeed  best  in  gathering  trade  sta- 
tistics, because  there  are  a smaller  number  to  be  educated  up  to  the  valujs  of 
taking  the  time  and  trouble  to  fijunish  these  statistics  for  coopilation  and  dis- 
semination. The  plan  of  the  American  Eardwood  lianufacturers’  Association  called 
for  a monthly  production  report,  but  this  feature  of  the  plan  had  to  be  abandoned 
because  members  either  did  not  have  their  bookkeeping  so  ordered  that  they  could 

furnish  this  iiifonration,  or  they  v#ere  unwilling  to  take  the  time  andlarouble  to 

1 • 

do  so. 

In  discussing  reports  of  trade  statistics,  costs,  et  cetera,  considera- 
tion vd.lx  be  given,  iirst,  to  those  which,  when  considered  in  relation  to  each 
other,  throv/  a light  on  present  and  future  market  conditions,  thesebeing  reports 
of  orders,  production,  sliipments,  and  stocks;  second,  consideration  will  be  given 
to  imports  of  costs,  and  to  reports  of  items  v,hich  are  elements  of  costs,  namely 
reports  of  credit  information,  purchases,  advertising,  and  v^iges.  This  will  com- 
plete our  review  of  the  main  feat-ares  of  the  reporting  plan. 

As  oftenas  not,  associations  require  members  to  submit  their  x’eports 
of  orders,  shipments,  production,  aid  stocks  in  combined  form,  and  these  are  then 
sucmarized  by  the  secretary  and  issued  to  the  membership  in  combined  form.  Sy 
bringing  figures  of  orders,  production,  shipments,  and  stocks  Into  Juxtaposition 
on  one  form,  a bird' s-eye  view  of  the  general  trend  of  the  market  is  secured. 

Of  necessity  a report  of  this  kind  is  very  general  in  its  p'or/iew.  If  a product 
is  divisible  into  many  species  or  grades  soiiie  or  all  of  which  mve  a conpetitive 
narket  all  their  own,  it  is  probable  that  a combined  report  wo-uld  not  be  satis- 

i7  ~ 

Gadd,  F.  E, , Eecord,  American  Col.  and  Limber  Co.  et  al.  Vol.  2,  p.  1107. 


87 


factory  unless  it  could  be  issued  for  each  species  or  grade,  for  a cocibiued  re- 
port could  of  necessity  not  sliow,  for  exaxaple,  the  orders  received  for  each  grade, 
or  the  production,  shipments  and  stocks  of  each  grade.  In  as  much  as  the  cocpeti- 
tive  sit’oation  for  one  grade  might  be  entirely  different  from  that  of  another,  it 
foilows  tnat  a combined  rep/ort  in  vvhich  grades  or  species  bjavo  no  place  might  not 
be  the  iiiost  acceptable.  On  the  other  hand,  the  work  entailed  in  getting  out  sepa- 
rate reports,  one  of  v/hich,  for  example,  might  show  the  volume  of  orders  for  each 
grade  or  species,  another  the  prodruction  of  each  grade  or  species,  another  the 
stocks  of  each  grade  or  species,  et  cetera,  might  be  so  great  as  to  maice  it  im- 
practicable ”00  adopt  the  system  of  individual  reports  in  its  entirety. 

Tne  North  Caroliiia  Pine  Association  loas  foundldis  use  of  a combined  form 
to  be  fairly  satisfactory  because  its  members  are  interested  principally  only 
in  one  kind  of  lumber,  namely  the  pine  grown  in  the  Carolinas.  But  even  in  this 
case  the  report  is  deficient  because  it  does  not  concern  itself  with  the  various 
grades  of  pine,  nor  with  the  various  thicknesses  in  each  grade.  In  an  associa- 
tion like  the  Bardv/ood  itoofacturers’  Assoclskion,  representing  a membership  that 
produces  aiid  iramets  moretliaii  a dozen  different  species  of  hardwood  lumber,  each 
one  of  which  lias  several  grades,  all  of  which  have  several  different  thiciaaesses, 
it  is  imaiiifest  tliat  a comoined  report  could  not  be  used  with  success,  liembers  of 
the  North  Carolina  Fine  Association  report  each  Lbnday  on  a specially  prepared 
form  the  total  volume  of  orders  for  pine  that  have  been  accepted,  the  total  ship- 
ped and  tne  total  produced  during  the  preceding  week,  all  measured  in  feet  of 
luiiiber.  Space  is  a Iso  provided  for  recording  the  normal  output  per  day.  It  is 
specifically  stated  that  t>ie  figu.rea  submitted  7/ill  be  held  strictly  confidential, 
iTo  signature  is  required,  each  reporting  member  merely  inserting  the  number  by 
which  he  is  identified  in  the  secretary’s  office.^'  On  the  following  Thursday 
each  merriber  reporting  is  mailed  a printed  Nummary  of  the  figures  that  have  been 
1 . 

See  copy  of  report  in  Appendix,  Exhibit  24. 


8£ 

roported.  This  shews  the  iran'her  of  mills  reporting,  the  totals  and  avero^ges  per 
mill  of  orders,  shipments,  production  and  normal  pi-oducticn,  the  percentage  re- 
xationsiiip  hetv/een,  first,  orders  and  shipments;  second,  orders  and  actual  produo 
tion;  third,  dalpments  aiid  actual  production;  fourth,  orders  and  noraial  productioh; 
fifth,  shipments  and  normal  production;  sixth,  actual  production  and  normal  pro— 
duction.  Furthermore  the  percentage  to  normal  of  orders,  production,  and  ship- 
ments is  shown  ^rapnically  oy  tne  use  of  a form  of  barometer  originally  used  by 
the  Brooicmire  Economic  Ser/lce  to  picture  fundamental  business  and  finaiicial  con- 
ditions,^ Finally  the  orders,  shipments,  production  and  normal  production  as 
given  oy  previous  reports  running  back  over  a period  of  three  months  is  shown  in 
columnar  form,  thus  enabling  a coimsarison  to  be  made  from  month  to  month.  Statis- 
tics of  stocks  have  no  place  in  this rexjox't . They  are  collected  and  disseminated 
only  about  once  a year. 

Some  associations  apparently  prefer  to  substitute  in  their  combined  re- 
ports statistics  of  stocks  for  statistics  of  orders.  One  association  issues  a 
monthly  statement  of  production,  shipments,  and  stock,  in  which  the  statistics 
for  each  are  shown  for  every  month  covering  a period  of  four  years.  In  addition 
each  member  receiving  this  report  is  given  his  percentage  of  production,  ship- 
ments and  stock  to  the  totals  for  the  association.  Since  figures  are  lumped, 
those  of  any  single  concern  are  not  known  wC  any  other  single  concern,  but,  as 
just  indicated,  each  member  is  given  his  proportion  to  the  v/hole.  By  comparing 
this  proportion  month  by  month  and  year  by  year,  every  member  can  deteimuine  whether 
..e  is  getting  tne  share  ofviork  that  he  is  accustomed  to  get,  or  mors  or  less,  and 
ne  can  determine  whether  he  is  carrying  too  heavy  or t oo  light  a stock. 

The  rTational  Association  of  Chair  I»Ianufacturers  does  not  atteipt  to 
gather  aad  disseminate  statistics  of  production  and  stocks.  I.fembers  are  asked 

See  copy  of  report.  Appendix,  Exhibit  25. 

C • 

Sab^,  E.  w.,  Eeports  on  Cooperation  , Ho.  C.  C-7. 


89 


to  Bubiriit  a monthly  report  on  a specially  prexoared  form  showing  in  dollars  the 
total  shipments,  total  orders  received,  total  cancellations,  and  total  unfilled 
orders  for  each  of  five  different  chair  groups  conroosed  of  dining  room,  "bedroom, 
and  office  cliairs,  rockers,  and  miscellaneous.  With  the  report  members  are  re- 
quested to  transmit  a check  to  cover  monthly  dues,  based  on  a percentage  of  the 

!•  i 

total  shipments  reported.  With  these  data  as  a basis,  the  secretary  issues 

each  month  a graphic  chart  called  a "Monthly  Experience  Chart".  By  means  of 
graphs  the  trend  of  orders  received  is  indicated  not  only  for  the  whole  of  the 
present  year,  month  by  month,  out  forttie  corresponding  months  of  the  year  pre- 
ceding;  in  the  same  manner  graphs  are  drawn  to  show  shipments  made  this  year, 

shipments  made  last  year,  unfilled  orders  this  year  and  unfilled  orders  last 

2. 

year,  all  by  months,  and  in  terras  of  dollars. 

In  the  Sales  Book  I'tonufact’nrers’  Association  the  secretary  issues  a 
monthly  report  showing,  not  only  production  and  order  statistics,  but  the  number 
of  quotations  that  have  been  filled  at  variance  with  price  lists  and  the  number 
who  have  sold  below  their  price  lists.  Aside  from  the  notation  of  the  special 
quotations  filed,  and  the  sales  below  list,  the  following  information  is  given 
in  columnar  form:  first,  percent  actual  quantity  production  to  normal;  second, 
percent  actual  value  production  to  normal;  third,  percent  actual  quantity  sales 
to  normal,  fourth,  percent  actual  quantity  books  sold  new  users  to  total  sold; 

time  required  to  conplete  unfilled  orders  and  contracts.  The  arrangement 
is  such  that  ttese  data  appear  for  each  member,  but  members  are  designated  by 

number  only.  Below  these  data  is  a comparative  table  showing  this  information 

3. 

by  averages  for  the  past  year  according  to  months. 

Production  and  shipment  statistics  are  frequently  combined  in  one  re- 
port. In  the  lumber  industry  it  is  customary  to  issue  a monthly  report  of  cut 

See  copy  of  report,  Ai^pendix,  Exhibit  26. 

^*See  copy  of  report.  Appendix,  Exhibit  27. 

•See  copy  of  report.  Appendix,  Exhibit  28. 


Ati? 

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90 


and  shiomants.  Oi^.e  association  isaices  a grapliic  record  of  orders  received,  pro- 
diaction  and  shipments,  shovdng  "by  means  of  lines  the  comoarntive  trend  in  percen- 
tages  by  months. 

A s-nfflcient  ntunher  of  illustrations  have  been  given  to  show  that  there 
is  little  uniformity  in  the  arraitgenent  of  the  contents  of  these  combined  rep'.orts. 
Each  indvcstry  has  apparently  sou^xt  to  evolve  a form  which  would  best  meet  its 
pe  culiar  re  q;air emient  a . 

Individ’oal  reports  of  orders,  production,  shipments  and  stocks  appear 
to  be  less  freqixently  used  tlian  the  combined  form*  of  report.  Undoabtedly  the 
combined  form  of  report  makes  the  strongest  appeal  to  the  average  business  man 
oecause  it  gives  him  at  a^ance  a perspective  of  t he  whole  industry  that  he  can- 
not secure  from  a xierusal  of  individual  reports  except  by  correlating  them  in  his 
own  mind,  a tasm  ti'iat  is  often  regarded  as  being  too  irksoise  to  undertake. 

A comrr*cn  form  of  individxuil  report  submitted  by  secretaries  to  show  the 

periodic  relationship  between  vol'cme  of  sales  is  described  in  one  of  the  bulletins 

3. 

on  cooperation  published  by  Bab  son*  s Statistical  organization.  T-»vo  colvoms  of 
percentages  are  given.  One  coltimn  show's  the  percentage  of  sales  made  by  all  mem- 
bers for  the  nonth  reported,  of  sales  made  by  all  members  for  the  same  month  of 
the  preceding  year;  the  other  column  shows  the  percentage  of  sales  by  all 
rr;eirfbers  from  the  beginning  of  the  year  to  and  including  the  month  of  the  report, 

and  01  sales  ma,d8  by  all  members  for  the  same  period  of  the  preceding  yeax’.  The 

4. 

Oxjtical  Ii^an'ofactux’ers*  Association  compiles  a weekly  report  of  orders.  Once 


1. 

See  an  illustration,  iLmerlcan  Lumberman,  Eeb.  10,  1S12. 

2. 

Eor  copy  of  report  see  ITaylor,  E.E. , Trade  Associations  , New  York,  1921,  p.oeo 
3 • 

Babson,  R.W. , Bulletins  on  Cooperation.  C.-C.ll. 

4. 

G-aunt,  E.K. , Jooperative  Competition,  p.  20. 


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91 


every  th.ree  inonths  the  Tool  S.eel  Society  issues  a hiueprint  which  shows  diagram- 

matically  for  each  kind  of  steel  the  total  vol'ojne  of  orders  received  in  pounds 

1. 

for  each  rionth  of  the  preceding  three  iDonths.  The  diagrams  show'  at  a glance 
whether  orders  have  been  increasing  or  diminishing. 

Statistics  of  production  are  us’cally  assen'oled  w/ith  other  statistics 
in  a combined  form.  The  Drill  and  Eeamer  Society,  however,  does  issue  a form 
based  on  the  percentages  of  operation  as  reported  by  the  membership,  showing  the 
av  ei’age  percentage  cf  operation  for  Tjhe  month  as  compared  to  no  real  as  well  as 

that  for  the  month  oreceding,  together  with  the  increase  or  decrease  in  percen- 

2. 

tage. 

Stock  reports  nay  be  very  simple,  as  in  the  case  of  the  Sa3.t  Prodiicers’ 
Association,  vihlch  divides  salt  into  but  four  grades,  or  they  may  be  very  com- 
plex, as  in  the  case  of  the  American  Hardwood  I.hnufacturers’  A^ssociation,  v;hose 
membership  produces  from  fifteen  to  twenty  different  species  of  luniber  each  oitb 
of  which  is  divided  into  several  grades.  Furthermore  each  of  these  grades  is 
divisible  into  several  thicknesses,  lumbers  of  the  American  Hardwood  I/anufac- 
turere'  Association  v/ere  required  to  submit  a nxinthly  report  showing  the  totals 
of  all  grades,  ihicknesses  and  kinds,  and  this  information  was  redistributed 

monthly  by  the  s ecretary.  The  secretary’ s report  showed  only  totals,  the  ejum- 

3. 

titles  in  the  hands  of  individual  manufacturers  not  being  Indicated.  Several 

A 

of  the  other  lumber  manufacturers’  associations  distribute  monthly  stock  reports. 


The  block  cb«irt  is  used  in  this  case.  See  copy  in  Appendix,  Exhibit  29. 

2. 

See  copy  of  report  in  Appendix,  Exhibit  30. 

w • 

See  copy  of  stock  renort,  Auuendix,  Exhibit  31. 

4. 

The  Horthem  Hemlock  and  Hardwood  Manufacturers’  Association  began  reporting 
stocks  in  1914,  and  the  Yellow  Pine  A^ssociation  (now  Southern  Pine  Association) 
in  1913. 


t *r> 


92 


As  early  as  1913  the  North  Carolina  Pine  Association  inaugurated  a scheme  which 
was  calculated  to  prevent  the  narket  from  heing  unduly  depressed  by  the  presence 
of  suiplds  stocks.  Ivfembers  report  their  list  of  surplus  stocks  to  tne  secretary, 
who  in  turn  circulates  t he  list  among  the  membership  for  the  pui^ose  of  enabling 

members  to  buy  up  surpluses  before  having  them  thrown  on  the  market  to  depress 
it. 

If  the  limited  information  available  may  be  taken  as  axi  index,  ex- 
change of  data  dealing  with  purchases  is  not  very  prevalent.  Probably  it  is  as 
mch  to  the  advantage  of  meet  ers  to  have  reports  of  purchases  as  it  is  to  have 
reports  of  sales.  They  caii  lose  as  much  money  through  ignorance  of  conditions 
surrounding  the  purchase  of  raw  materials  as  they  can  through  ignorance  of  the 
market  conditions  surrounding  the  sale  of  their  finished  goods.  The  Salt  Pro- 
ducers' Association  exchanges  information  every  month  as  to  the  number  of  tors 

2. 

of  salt  purchased  by  mern’oers.  Members  of  the  National  Pox  and  Shook  Ivknui*ac- 
turers'  Association  oxcha"ge  information  ri»nthly  relative  to  purchases  of  box 

lumber.  The  quantity,  description,  price,  f.c.b.  uoint,  and  the  concerns  from 

3. 

v;hcm  purchased  are  given.  Usually  the  conmlled  reports  of  purchases  submitted 
by  the  secretary  to  the  members  do  not  give  the  member's  or  seller’s  names,  or 

any  details  of  the  purchase,  but  merely  states  whiat  the  articles  are,  the  epuan- 

4 . 

titles  purchiased,  and  the  prices  paid. 

Tliere  appears  to  be  little  interchange  of  informa-ticn  bearing  on  the 
cost  of  laoor.  The  workers  themselves  have,  in  many  quarters,  throuxgh  their 

T. 

The  American  Lumberman,  Oct.  24,  1913.  u.  46. 

2.  » » 1 

See  copy  of  report,  Appendix,  Exhibit  32. 

V • 

See  copy  of  report,  Appendix,  Exhibit  33. 

4. 

Naylor,  E.H. , Trade  Associations,  p.  26S. 


- '•  ’'VCf-c 


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laoor  crganiza-cions  oTstalned  .score  exact  inforncation  as  to  ;vages  and  working  corir 

1. 

ditiong  than  have  their  eroployers.  The  National  Association  of  Box  I'an-'afactu- 

rers  exchanges  information  once  a month  as  t o the  hourly  rate  of  wages  paid  for 

the  various  classes  of  labor  in  use.  The  rate  paid  for  overtime  and  the  munber 

2. 

of  hoiirs  per  day  that  factories  are  running  are  also  given. 

The  work  done,  not  only  by  open  price  associations,  but  by  the  ordinary 
trade  associations,  in  cooperative  advertising  is  so  well  known  that  it  scarcely 
needs  to  be  mentioned  here.  Suffice  it  to  say  that  associations  are  doing  a 
greau  deal,  not  only  in  the  way  of  popularizing  the  products  which  thej^  sponsor, 
but  also  by  determining  the  relative  merits  of  the  various  advertising  media, 

amd  effectively  removixig  such  abuses,  for  example,  as  ’’padded”  s-abscription 

3. 

lists. 

The  interchiuige  of  cost  infomcation  Is  a very  vital  part  of  open 
price  work.  It  is  done  on  the  theory  that  ignorance  of  costs  is  greatly  re- 
sponsible for  the  ruinous  cutting  of  prices;  that  when  members  know  their  costs 
they  will  quote  prices  intelligently.  llr;  Belt,  Chief  Accountant  for  the 
!Ebderal  Trade  Commission,  in  an  address  before  a group  of  hardwood  lumber  imanu- 
facturers,  stated,  "It  is  generally  admitted  that  ruinous  prices  are  due  more 
to  the  fact  mhat  manufacturers  do  not  know  vidiat  their  actual  costs  are  than  to 
their  desire  to  sell  at  prices  which  do  not  yield  fair  returns  on  the  money  in- 
vested. " He  further  stated  tliat  the  Federal  Trade  Commission  in  its  work  had 
fouitd  that  a majority  of  the  business  failures  wrere  attributable  to  poor  acccrcsnt- 

T. 

Garside,  A.H. , The  Value  of  Statistical  Reports  in  Business,  address  before 
tne^annual  convention  of  the  Ehit  Goods  I.!aiTufacturers  of  jimerica,  !,!ay  20,  1930, 

o 

See  copy  of  vra,ge  report  ff-ubmitted  by  mem'oers,  Appendix,  Ibchibit  34. 

O t 

Babson,  R.W. , Reports  on  Cooperation,  C.  C-11, 

4. 

Gaunt,  E.H. , Cooperative  Competition,  p.  28. 


94 


1. 

ing  and  inadeqmts  "business  information. 

In  order  to  con^r^ars  costs,  it  is  necessary  that  all  m.emhers  have  a 
vuiifonr.  method  of  fig-aring  costs.  This  does  not  mean  that  certain  cost  fig'.ires 
are  to  he  imposed  upon  members;  it  means  that  they  are  to  use  their  own  finires, 
hut  in  arriving  at  those  flgares  the  same  method  is  to  he  used.  In  order  to 
get  'uniformity  of  method,  it  is,  of  course, necessarj'  that  the  association  take 
the  initiative  in  '.vorking  out  a system  of  uniform  accounts  sTiitahle  for  the 
industry.  Us*::ally  a comrrilttee  tslien  from  the  mamhershi-c  is  put  in  charge  of 
developing  a sj’'stem.  The  conmittee  generally  hires  a cost  accountant  to  study 
the  industry  and  to  do  all  the  detail  ^^york.  He  sometimes  visits  the  ulant  of 
every  member  of  the  association  in  order  to  learn  wherein  methods  of  operation 
vary  and  wherein  th^y  are  alike,  so  that  a system  may  he  installed  which  v;ill 
he  sufficiently  flexible  to  he  adaptable  to  all  plants.  It  is  generally  found 
advisable  to  mame  the  system  as  simple  as  possible,  for  members  will  not  be 

prevailed  upon  to  install  one  that  is  so  intricate  in  its  operation  that  they 

\ 

cannot  understand  it.  Once  having  established  costs  on  a conparable  basis, 

members  are  in  a position  to  intelligently  discuss  them  in  meetings  and  through 

the  medium  of  the  secretary.  For  several  years  the  exchange  of  costings  has 

2. 

been  going  on  among  lumber  manufacturers’  associations.  A common  method  of 
exchanging  -costings  has  been  for  members  to  submit  cost  sheets  sho-vlng  costs 

..or  the  leading  items  of  production,  whereupon  the  secretary  has  averaged 

..  3. 

t..ese  costs,  mailing  to  each  member  reportirg  a statement  of  average  costs. 

1. 

Address  before  the  Hardwocd  I.'anuf acturers’  Association  of  the  United  States, 
Jan.  30,  1917,  Am.erican  Lumberman,  Feb.  3,  1917. 

For  copies  of  cost  reports  submitted  by  members  of  the  Forth  Carolina  Pine 
Association  and  cost  _stater.ents  su.bmltted  by  the  secretary  to  the  membership 
see  Aopo-ndix,  Exhibits  35  and  36.  '* 

3. 

Air-erican  Lumberman,  !,Iay  1,  1915. 


95 


A forr.  cf  activity  iri  v;hioh  all  of  the  aasoclations  or^.aaiaed  oy  llr. 
Eddy  are  engaged  is  the  interchange  cf  credit  information.  Other  associations 
have  made  little  progress  along  this  line..  No  donht  so  little  headway  has 
been  i:ade,  first,  becatise  of  the  existence  of  credit  men’s  associations,  to 
which  most  members  probably  belong;  second,  becatise  of  the  fear  of  the  average 
business  man  tnat  conpetitcrs  \rill  find  out  through  such  an  exchange  v;ith  v;hom 
he  is  dealing.  Credit  men's  associations  are  made  of  non- competitors.  Of 
necessity  spich  an  association  coti.ld  not  furnish  each  member  with  as  intimate 
a knowledge  of  a customer's  credit  standing  as  ccr.fld  an,  organization  made  up 
of  members  in  the  same  line  cf  trade.  &j,ch  a vital  matter  as  le.aming  how 
mch  credit  ’:ad  already’’  been  granted  to  a crastonier  could  not  very  easily  be 
ivSi-Sx  ualnea.  oy  a credit  association  imide  up  of  non— competitors;  bu.t  the  secre- 
tary^ of  an  open  price  association  cc-'ald  give  this  information  because  he  has 
probably  req;aested  each  member  to  advise  him  how  much  credit  he  has  already 
extended  to  each  cf  his  custonjers  and  r.hat  the  credit  limit  is  cf  each  customer. 

One  Open  j^rice  association  ashs  its  members  to  cneclc  such  of  the 
following  as  are  applicable  to  each  of  their  cu.stomers  and  nail  the  form  to 
the  secretary,  whereupon  he  bulletins  it  to  the  other  members  or  refrains  from 
doing  30  if  the  reporting  members  so  req^aest: 

1.  Accounts  overdue. 

2.  Eefuoed  statement. 

3.  Hefused  to  accep^t  delivery. 

4.  Took  excessive  discount. 

5.  Slow  pay. 

6.  Draft  not  honored. 

7.  Note  or  check  ^pretested. 

8.  Transferred  real  estate. 

Closed  by  sheriff. 


9. 


i* 

• • ■ *7  « • . 6 li- 


•%.  » 


96 

1C. 

lias  sold  out. 

• 11. 

Has  re^jnested  extension. 

12. 

Ju.dgr.:ent  entered  against. 

13. 

Has  had  fire. 

14. 

Has  made  assignment. 

15. 

Is  in  'bankraptcy. 

16. 

Condition  improved. 

17. 

Account  satisfactory. 

CO 

• 

Cancelled  order  without  authority. 

IS. 

Betumed  merchandise  y/ithout  permission. 

20. 

l!!ade  unjust  claim  of  shortage,  of  condition,  of  (pmlity,  etc. 

‘21. 

Deducted  discount  to  v/hich  not  entitled. 

23. 

Account  collected  "oy  attorney  or  agency. 

23. 

Account  paid  hy  installments. 

24. 

Has  given  chattel  or  real  estate  mortgage. 

25. 

Has  given  hill  of  sale  or  t rust  deed.  ' 

In  addition  inerribsrs  are  reon.ested  tc  give  the  name,  address,  a.nd 

■business  of  the  customer,  the  period  of  time  that  the  customer’s  account  lias 

heen  on  the  hooks,  tiie  maximinn  credit  extended,  and  the  uresent  condition  of 
1 

the  acco'mt. 

1. 

This  form  is 

in  use  hy  the  Cotton  Thread  !.!anufacturers’  exchange. 

E^W 

•W 


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97 


CHAFTZR  VI 

TEE  ADVAITOAGES  AED  DISADVA2TTAGES  COIEJECTED  WITH  OPEN  PEICS  WOKE 

The  plan  of  this  chapter  vvill'^be  to  consider  in  the  first  part  the 
advantages  attending  the  operation  of  the  open  price  S7stein,  and  in  the  second 
part,  the  disadvantages  involved,  first,  in  the  attempt  to  install  an  open  price 
system;  second,  in  the  operation  of  snch  a system.  In  both  parts,  the  aim  vdll  be 
not  only  to  discriss  the  general  advantages  and  di sadvantage s tliat  inure  from  the 
operation  of  the  open  price  association  as  a vdiole,  biit  to  pay  some  attention  to 
the  particular  difficulties  or  benefits  flo-^ng  from  each  phase  of  its. work.  Be- 
cause of  the  newness  of  the  open  price  movement  very  little  data  have  as  yet  been 

accumulated  vMch  might  throw  any  light  on  the  attitude  of  buyers,  whether  they 

1 

oe  engaged  in  biuying  for  resale  or  in  buying  for  purp)Oses  of  consuir.pt ion.  Pro- 

baoly  insufficient  time  iias  passed  for  sentiment  to  be  crystalized,  one  way  or 
tile  other.  The  writer  is  therefore  constrained  to  write  this  chapter  principally 
from  the  point  of  view  of  the  member  of  the  open  price  association,  although  not 
entirely  so.  Some  discussion  will  be  devoted  to  an  elucidation  of  the  point  of 
view  of  purcliasers. 

AEVAMTAGES 

Erom  the  point  of  view  of  the  member,  all  benefits  of  open  price  work 
may  be  said  to  be  derived  from  the  operation  of  t^wo  factors,  namely,  first,  the 
b'oilding  up  of  the  sjjirit  of  cooperation;  second,  the  intercliange  of  information. 
Soma  secretaries  have  expressed  to  the  writer  their  opinion  tliat  the  development 
of  the  former  element  is  the  more  important.  Probably  neither  one  is  more  im- 

1. 

•The  benefit  to  the  constoner  from  the  conservation  of  timber  due  to  the  opera- 
tion of  the  open  price  system  is  discussed  in  cliapter  Vllo  Pii*  143-156. 


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98 


portajit  than  the  other*  Ahont  all  toat  can  he  tiMthfu-lly  said  is  that  there  niust 
he  a ceroain  degree  of  tne  cooperative  spirit  developed  before  menihers  are  will- 
ing to  interchange  info  mat  ion  fully,  and  freely.  A concrete  illustration  of  the 
attitude  that  is  developed  oetween  competitors  hy  the  preaching  of  cooperation, 
hy  frequest  contact  in  meetings  and  the  lilre  is  afforded  hy  the  testimony  of  Mr. 
Snith,  President  of  the  Union  Steel  Casting  Company,  in  the  Steel  Case: 

Q.  "Now  what  is  the  difference,  if  any,  in  the  attitude  of  competitors  in 
your  line  toward  one  another  from  the  condition  that  prevailed  fifteen  years  ago?" 
A.  "Vfe  are  honestly  friends  now.  Then  we  pretended  to  he  friends,  hut  were  the 
bitterest  eneraies. " 

Q.  "Can  you  give  any  illustration  of  tliat?"  A.  "Yes,  sir.  Perhaps  a year 
and  a half  ago  or  two  years  ago  v;e  were  in  difficulty  in  malcing  driving  wheel 
centers  for  the  American  Locomotive  Company  people.  They  comralained  about  it, 
and  I personally  w^ent  there.  I knew  wliat  caused  them.  We  had  to  use  anchors  to 
carry  the  core.  I found  out  what  their  complaint  was;  asked  them  if  any  body  was 
furnishing  driving  wheel  centers  without  that  difficulty.  They  said  the  ^ratt  & 
Letchworth  Company  of  Buffalo  furnished  them  without  the  hard  spots.  I went  to 
Buffalo  and  bold  Pratt  & Letchworth  Company  of  our  difficulty  and  asked  them  how 
they  avoided  it.  They  showed  me  a new  kind  of  anchor  they  had,  which  did  not 
make  hard  spots,  gave  me  samples  of  them,  and  I got  the  saiiie  kind  and  had  no  fur- 
ther trouble.  ?Mle  I was  there  they  told  me  that  they  iiad  some  difficulty  with 
the  sand,  that  their  castings  did  not  clean  as  ’^11  as  ours,  and  wanted  to  know 
the  trouble.  I,  of  co*arse,  gave  them  all  the  help  I could  and  told  them  tliat 
they  were  not  grinding  it  enough,  and  stayed  with  them  for  about  half  a day,  and 

1. 

Kecord,  U.  S.  vs.  United  States  Steel  Corporation,  Vol.  20,  prp.  3058-3069. 


99 


they  got  better  result sfrom  their  sand,  and  we  had  no  more  liard  spots  in  our  whee] 
centers.  ?/e  visit  each  others’  plants  for  the  purpose  of  improving  our  condition, 
and  have  no  hesitancy  in  helping  each  other  when  we  can.” 

Obviously  where  cooperative  efforts  are  directed  toward  muttial  helpful- 
ness in  improving  industrial  processes  the  benefit  rsdoinids  not  only  to  the  com- 

1 

cetitors  involved  but, to  the  consumer. 

^ .4 

A good  illustration  of  the  cooperative  spirit  developed  in  meetings  is 
afforded  by  the  following  extract  taken  from  the  affidavit  of  a hardwood  manu- 
facturer belonging  to  the  American  Hardwood  I^Ianufacturers’  Association: 

"The  fall  and  winter  of  19 IS  found  us  with  a large  ac;cumulaticn  cf 
stocks  on  liand  in  thoroughly  dry  condition,  and  we  found. that  it  was  difficult  to 
move  them  at  the  prices^ie  were  asking.  This  condition  continued  through  the 
earlier  part  of  1S19,  aicd  in  spite  of  our  repeated  sales  effort,  we  did  not  se- 
cure any  business  for  Red  Gum  as  well  as  some  other  items.  Therefore  at  a group 
meeting  at  Memphis,  when  market  conditions  were  being  discussed,  I fcand  that  my 
competitors  had  been  selling  their  Eed  Gum  freely.  I advised  the  group  that  I 
had  been  unable  to  move  our  red  gum  and  that  we  liad  an  accirmlation  of  the  stock 
above  normal.  It  developed  that  my  competitors  had  been  able  to  move  their 

stocks  because  their  prices  were  considerably  lower  than  ours.  Shortly  following 

this  meeting,  owing  to  our  insistent  efforts  to  place  before  the  consuming  trade 
of  the  country  our  red  gum  stock,  we  commenced  to  receive  a good  many  inquiries 
and  this,  in  part,  as  a res''uLt  of  the  fact  tr3,t  our  com :eti tors  7/hc  were  at  the 
grouu  meeting  where  I stated  we  xiad  this  stock,  informed  their  customers  that  we 

could  suDToly  their  needs.  * * ^ fact  that  these  group  meetings  develop 

1. 

For  an  account  of  the  growth  of  the  cooperative  spirit  in  the  New  Heiford 
Open  Pries  Association,  see  Journal  of  Corrimerce,  May  1,  1915. 


. 

^^0 


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1' 

• 

>!«J  Bril 


100 


a spirit  of  good  fellowship,  whereby  my  competitors  are  willing  to  advise  a 

buyer  that  a common  competitor  can  furnish  stock  that  they  do  not  haopen  to 

1 

iiave,  is  of  great  value  to  me.”  I 


Members  intercl^nge  information  in  order  to  loam  as  closely  as  poss- 
ible ail  the  factors  that  have  a bearing  on  the  raarivet  for  their  product.  If 
they  lack  knov/lodge  of  the  market  they  are  prevented,  first,  from  properly  re- 
gulating their  business  in  conformity  with  bp.siness  conditions j second,  from 
securing  the  highest  price  for  their  product  that  narket  conditions  v^arrant. 


benefit  from  'the  Interchange  of  iru’ormation,  because  of  the  fact  that  the  large 


tion  for  himself  through  his  salesmen  and  by  other  means  than  is  the  small  pro- 
ducer, WX10  in  many  instances  does  not  even  have  a traveling  salesman  in  his 
employ.  This  is  strikingly  brought  out  in  the  case  of  the  smll  mill  owners 
who  belonged  to  the  Affierican  Hardwood  Manufacturers*  Association.  Mr.  Boyle, 
attorney  for  the  Association,  in  his  argument  before  the  Supreme  Court  stated 
tliat  of  the  forty-eight  letters  which  the  is^^-ager  of  Statistics  of  the  associa- 
tion received,  commending  open  price  work  tliat  ms  being  done,  all  of  those 
tiiat  indicated  that  a better  price  had  been  received  in  one  instance  or  another 

as  a result  of  the  operation  of  tlie  open  price  system,  were  from  small  mills 

2 

without  a sales  organization.  iiumerous  affidavits  from  small  mill  owners, 
tairen  in  the  case,  point  to  the  same  conclusion.  The  following  is  typical: 


In  one  sense  the  small  producer  may  be  said  to  receive  the  greatest 


tt 


As  an  operator  of  a comparatively  small  mill  which  maintains  no 


Weiss,  H.  B.  Eecord,  American  Column  & Lumber  Co.  vs.  U.  S.  Yol.  3,  p.  1667-! 
2 , _ 

Argoment  of  l.  C.  Boyle,  in  tlie  9u.preme  Court  of  the  United  States,  American 
Coluirn  & Lumber  Company  vs.  U.  S. , Oct.  21,  1920,  p.68. 


U.  S.  Yol.  3,  p.  1667-8. 


101 


sales  force,  he  fovoid  these  reports  and  letters  of  great  yalue  to  hio;.  Previous 
to  belonging  to  the  Association  he  was  largely  at  the  mercy  of  the  wholesaler,  to 
whom  he  has  always  sold  the  bulk  of  his  production.  Before  joining  this  Associa- 
tion and  receiving  these  reports,  in  June  191S,  he  sold  first  and  second  quartered 
white  oak  to  wholesalers  for  $88.00  per  thcmaand  at  the  mill,  or  $105.00  per  thcu- 
sand  in  Boston^  For  which  these  wholesalers  obtained  from  the  consumers  the  pre- 
vailing price  of  $250.00  per  thousand.  This  condition  of  ignorance  of  conditions 
worked  a hardship  on  him  and  was  of  no  benefit  whatever  to  tlie  consx'jning  public, 
the  wholesaler  reaping  all  the  profit  on  the  transaction. 

" That  a small  producing  mill  without  a sales  organization  cannot  under 

present  conditions,  intelligently  do  business  unless  through  some  association  or 

other  means  that  keeps  him  in  touch  with  market  conditions.  In  his  orjinion,  the 

Open  Competition  Plan  has  been  of  great  benefit  to  the  stall  producing  mills  and 

1 

lias  worked  no  hardship  v/hatever  on  the  consuming  public.  ” 

Mr.  F.  B.  Daoclt,  a small  ndll  owner,  gave  the  following  sworn  state- 
ment : 


le  received  the  sales  report  of  the  Or-en  Competition  Plan  and  found 
these  reports  of  great  use  in  keeping  him  informed  as  to  the  trend  of  the  market, 
j-his  information  was  of  value  to  him  in  enabling  him  to  gauge  the  worth  of  his 
lumber,  ♦ * * + ♦ ^ *.  infoiuiation  contained  in  these  sales  reports  was  of 

special  va,lue,  for  the  reason  that  his  firm  travels  no  men  and  has  no  sales  or- 
ganization, and  unless  ne  had  access  to  these  sales  reports  he  would  have  been 
ooliged  to  have  obtained  this  information  at  considerable  trouble  and  expense,  or 
else  ha/e  depended  entirely  on  the  statements  of  buyers  as  to  the  market  value  of 
his  produ-Ct.  In  that  vay  these  sales  rex^ortswere  of  x-^rh-ctical  and  financial 


Brief  for  the  Appellants,  American  Cokurnn  & L^'ornber  Company  vs. 

p.68. 


U.  S. , 


Part  2, 


102 


1 

value  to  him.  ” 

In  another  sense  the  large  producer  profits  perliaps  just  as  much  as  the 
small  producer  through  the  operation  of  a system  tliat  ma;:c:es  his  small  rival  a 
more  intelligent  competitor,  for  the  latter  is  then  not  so  lihely  to  "spoil”  the 
marhet,  - at  least  so  nms  the  argoment,  - and  in  so  far  as  price  cutting  is  due 
to  ignorance  of  the  maricet  and  not  to  financial  instability  or  other  causes,  it  is 
probably  valid.  A small  producer  can  do  more  d^Anage  to  the  marlcet  than  the  volume 
of  his  production  would  seem  to  give  him  the  power  to  do  because  he  can  make  qp.o- 
tations  e-^iiivalent  to  many  times  the  value  of  his  production.  Furthermore  large 
prod'acers  are  learning-  that  little  consolation  is  to  be  sought  in  the  fact  that 
competitors  who  quote  inordinately  low  prices  singly  because  they  are  not  posted 
on  market  conditions,  usually  go  bankrupt,  for  in  nearly  every  case  they  are  re- 
placed by  another  c rop  of  small,  wealc,  competitors,  who  will  also  "muddy  the 
water. " 

The  large  produ-cer  feels,  then,  that  the  only  remedy  for  a situation 

of  this  kind,  short  of  combination  or  consolidation  is  to  educate  the  small  com- 
2 

petitor. 

It  might  be  inferred  from  the  foregoing,  that  because  of  his  facilities 
for  gathering  infonfiation,  the  large  producer  derives  little  direct  benefit  from 
t?.e  operation  of  the  ooen  price  association.  It  is  tree  that  he  may  feel  no  need 
for  price  information  because  of  reports  receivedfromi  salesmen,  but  he  can  leain 


'Ibid,  Part  2,  p.  93. 

2. 

Journal  of  Commerce,  Jan.  3,  1816.  Mr.  3elt,  Chief  Accountant  for  the  Federal 
Trade  Conmiission  once  said,  "The  best  pi*ico  tonic  I know  of  is  an  educated  compe- 
titor." Address  before  the  Hardwood  Itoufacturers’  Association  of  the  United 
States,  Jan.  30,  1917.  American  Lvimberman,  Feb.  3,  1917. 

3. 

Many  manufacturers  of  hardwood  stated  that  they  felt  no  need  for  sales  reports 
because  they  employed  salesmen  who  kept  them  in  touch  v/ith  the  market.  See 
Eecord,  Aaierican  Cclnmn  & Lumber  Co.  vs.  U.  3.  Vol.  3,  p.  1508. 


iu:iB  4.  1 »• 


9 


V. 


yv  ^ 


. 


•f 


iC 


■ter r 


I ' t ^ 


"OC  . 


- io  X 1 ' 


' X 

0 


3%1 


• “ \ * 

, <ttp9jk  ? 

■V.  i . ?? 


103 


little  aoo'at  the  status  of  production,  stocks,  costa,  et  cetera,  in  the  industry 
unleas  he  exchanges  inforraation  with  his  competitors.  One  conse.^ence  will  oe  the 
lack  of  vital  statistics  on  which  to  "base  his  production  policy.  Bat  even  sales 
reports  might  be  of  value,  if  for  notliing  else,  at  least  as  a check  on  the  state- 
ments  of  salesmen.  Salesmen,  who  in  their  eagerness  to  make  a sale  have  q_uoted  a 
particularly  lov!  price,  contrary  to  the  instructions  that  may  have  been  given 
them,  are  wont  to  excrAse  their  action  on  the  ground  that  they  \vere  forced  to  malve 
this  price  in  order  to  meet  tl^t  made  by  another  competitor.  Heference  to  sales 
reports  will  often  show  whether  or  not  the  excuse  has  any  foundation  in  fact.  If 
it  has  not,  as  is  often  the  case,  aiepetition  of  needless  price  cutting  on  the 

part  of  salesmen  seeking  to  make  easy  sales,  can  be  orevented,  with  a consequent 

1 

saving  of  money.  Furthermore,  in  cases  where  salesmen  Ijave  bean  spending  con- 
siderable time  in  ascertaining  market  conditions,  the  use  of  sales  reports  would 

make  this  activity  unnecessary,  thus  permittinsr  salesmen  to  demote  all  their  attsn- 
2 

tion  to  selling. 

There  is  scarcely  anythingwritten  or  saidabout  the  open  price  plan  that 
does  not  stress  the  value  of  open  price  work  in  preventing  purchasers  from  per- 
petrating frauds  upon  the  producer  or  other//ise  overreaching  him.  This  may  be 
considered  one  of  the  leading  arguments  for  the  plan  and  is,  -perhaps  the  sti’ongest 
one  offered  in  justification  of  its  existence.  The  practice  among  buyers  of  mis- 
representing the  prices  quoted  to  them,  playing  one  competitor  off  against  the 
other,  in  order  to  "beat  down  r^rices”  orsecure  secret  rebates  or  discounts  or 
other  favors  has  become  so  common  that  it  is  scarcely  looked  upon  as  an  illegiti- 

1. 

For  illustration  of  the  use  of  sales  reports  as  check  On  information  received 
from  the  sales  force  see,  Record,  American  Cokumn  & Lumber  Co.  vs.  U.  S. 

Vol.  3,  P.  1921. 

2. 

Textile  World  Journal,  April  8,  1915. 


104 


1 

trad3  practice  any  longer. 

In  the  contracting  ^vorld  owners  misrepresent  the  xiat'ire  of  the  bids 

received,  leaving  the  irr^ression  among  those  v;ho  have  sabmitted  bids  that  theirs 

is  not  the  lowest,  the  intent  being,  to  induce  them  to  submit  lower  bids,  which 

they  usually  do,  unless  they  are  informed  by  means  of  the  exchange  of  bids  as  to 

the  t rue  circumstances.  Tliat  this  malpractice  has  been  given  a death  blov/  in  in- 

dij-stries  controlled  by  open  price  associations  is  averred  by  all  proponents  of 

2 

the  open  price  plan. 

By  the  interchange  of  information  the  cement  mannfactairers  have  tried 
to  prevent  speculation  in  cement  ccupled  with  cancellation  of  contracts.  Pur- 
chasers, thinking  that  from  fundamental  conditions  the  price  of  cement  would  go 
higher  in  the  fiiture  thaai  at  the  time  of  the  purchase,  freq;aently  have  atteiig;ted 
to  cover  a contract  for  a certain  building  or  other  piece  of  construction  work 
by  placing  duplicate  orders  with  different  mills  and  then  requiring  the  entire 
amount  ordered  from  all  mills  to  he  furnished  if  it  should  turn  out  tiiat  the 

price  has  gone  up  and  on  the  ceuxtrary  cancelling  art  on  some  pretense  or  other  if 

Of  4 

it  should  turn  out  that  the  price  ijas  gone  dorr.. 

Edidonce  in  the  jqard'wood  case  shows  bej^nd  doubt  tliat  wholesalers, 
prior  to  the  initiation  of  the  open  price  plan,  were  successfully  overreaching 
producers  who  were  in  ignorance  of  niarkot  conditions,  but  that  the  operation  of 


1. 

Johnson.  A.  S.  Eeview'  of  Hew  Competition  , by  A.  J.  Eddy,  Political 
Science  Quarterly,  ?ol.  28.  I.uxroli  3,  1913,  p.l43. 

2 . " 

* Ivlathews,  J.  Testimony  before  the  l^ew  York  Joint  Legislative  Committee  on 
Housing,  Record,  p.  4635. 

*7 

'Harrison,  L.  C.  Ri-cord,  American  Column  & L'omber  Co.  vs.  U.  S. , V©!*  3,  p.  If^o 

4 . 

For  further  illustrations  of  mal  practices  connected  with  bidding  see  account 
of  action  taken  by  the  Bridge  Builders  & Struct-ural  Society,  Iron  Age,  Vol.  96, 
July  1,  1915,  p.5?. 


105 


the  plan  'prevented  them  from  continuing  the  practice  among  msm'bsrs. 

One  memher  wrote  to  the  I.lanager  of  fhati sties  as  follows:  "From,  my 

ex'-'erience  as  a small  mon-irt'actnrer,  this  (sales  report)  is  one  of  the  most  imrnr- 

tant  seririces  the  Association  lias  given  me.  Before  ceccmlng  a memher  of  the 

Open  Competition  Plan,  I know  I have  sold  a good  many  cars  of  lumber  three  or 

four  dollars  'jnder  the  market  to  wholesalers,  unon  which  they  reaned  the  oenefit 
1 

of  my  ignorance." 

In  ail  affidavit  another  small  producer  made  the  follc?/ing  statement: 

"Affiant  maintains  no  sales  organisation  and  markets  his  products  largely  to 

wholesalers,  possihly  35  per  cent  of  his  product  heing  so  sold.  For  this  reason, 

the  sales  reports  of  the  Op^en  Competition  Plan  were  of  especial  value  to  ai'fiant 

for  the  reason  that  the  wholesalers  from  the  nature  of  their  ousiness  are  con- 

tin'oally  in  touch  with  the  market,  and  when  p,nrchasing  naturally  desire  to  huy 

at  as  lov;  a figure  as  possible.  These  sales  reports  were  a check  against  their 

statements.  By  virtue  of  these  reports,  affiant  states  that  he  was  enabled  to 

o 

• 

get  nearer  the  market  price  from,  the  wholesalers." 

Lumber  manufacturers  have  undoubtedly  been  dependent  upon  the  states 
cents  of  buyers  to  an  extraordinary  degree.  'Ohlike  grain,  cattle,  cotton  and 
many  other  basic  comcodities,  Imn'oer  lias  no  common  market.  There  are  no  current 
price  cpiotations,  no  statistics  as  t o receipts  at  cons'uning  points,  as  to  pro- 
dn.ction,  as  t o supplies  offered,  nor  of  prices  a^ed  or  bid.  Tlie  smaller  pro- 
ducers, In  particular,  sell  nearly  all  of  their  1-ambsr  to  the  wholesaler.  By 
reason  of  his  intimate  and  daily  contact  with  the  consuming  trade,  the  wholesaler 
has  been  in  a far  better  position  tlian  the  manufacturer  to.  know  the  needs  of  the 

^’Pohlssen,  H.  G.  Pecord,  American  Column  & Lumber  Co.  vs.  tt,  s.  Yol.  2,  Sxliib. 
Fo.  1136. 

2. 

High,  F.  H. , Pecord,  Yol.  3,  p.  1670. 


u'a,rket,  the  mar-iet  prices  and  a?l  the  facts  yhich  influence  prices.  It  is  made 

peculiarly’’  difficult  for  the  preat  nuitioer  of  sr-aller  rcanufacturers  to  get  narhet 

infonraticn  hecause  of  their  locations.  The  larger  and  stronger  concerns,  have, 

as  nreviously  stated,  kept  in  tor-ch  with  the  needs  of  consv!jnption  hyr  means  of  well 

1 

organized  sales  departments. 

UndouDtedly  similar  conditions  exist  in  many  other  industries.  Prooaoly 
every  indixstry  is  infested  with  ouyers  vho  profit  upon  the  ignorance  of  produ.cers 
hy  circulating  false  market  information.  At  least  false  price  reports  are  current 
everywnere,  however  they  may  have  originated,  and  in  the  absence  of  authentic 
information  sn.ch  as  open  price  associations  aim  to  give  marnoers,  considerable 
credence  is  given  to  them.  Mr.  Belt,  Chief  Accountant  for  the  Tederal  Trade  Corni- 
mission,  once  said,  "It  is  vjifortvnats  that  false  reports  as  to  prices  -quoted  by 
competltlng  houses  are  so  wridely  current.  Often  false  price  reports  are  given 
credence  and  prices  are  met  which  never  existed.  This  practice  in  the  aggregate 
has  a disastrous  effect  on  our  commercial  health."  The  rem.edy  according  to  Mr. 
Belt,  lies  in  x^roducers  exchanging  information,  coim:^aring  experiences,  and  dis- 
cussing  trade  problem.s. 

'The  GoTOmment  during  the  recentmr  fo-end  the  trade  s tatistics  that 

/ 

had  been  accimrolated  by  open  price  associations  of  ininense  benefit  in  determ-ining 

the  manner  in  w'hich  orders  for  supplies  should  be  allocated  among  the  various  ’ur-i,n- 

•ufactu-rers.  Imowing  their  productive  capacity,  it  was  conroaratively  easy  to  de- 

3 

termlne  the  size  of  the  order  that  should  be  given  to  each  of  theci. 

',T.  Belt  of  the  Federal  Trade  Commission  has  pointed  out  that  open 
price  associations  have  just  the  kind  of  kiformation  that  is  needed  by  the  var- 


■ Ft  ark,  !;!.  Ik,  Eecord,  American  Col.  & Lumber  Co.  vs.  U.  S.  Vcl.  3,  pp.  1247-1342 

“"•Belt,  B.  E. , Address  before  the  Hardwood 'jan^jf  acturers’  Assn,  of  united  States, 
An’jerlcan  Lumberman,  Feo.  3,  li?17. 


3. 


Journal  of  Commerce,  !ki,y  11,  1917;  May  IS,  1918,  Mar  19,  1920. 


107 


ious  govsmrental  'oodles  interested  in  the  aiTo-irs  of  'ousiness,  Including  such 
uiatters  as  supply,  denand,  prices,  costs,  productive  ca^-acity, et  cetera.  Pro- 
'oahly  the  rnanufacttu’ers  who  can  show  clearly  the  needs  of  their  industry  by 
means  of  statistics,  ’vill  receive  the  most  considex-ation  at  the  haiids  of  'oodles 
dealing  v/ith  such  matters  as  t'ne  tariff,  freight  rates^et  cetera. 

VJe  Ijave  seen  what  an  important  place  reports  of  bids  and  sales  have 
played  in  preventing  purcliasers  from  overreaching  particularly  the  suiall  prO” 
ducer.  Testimony  taken  in  the  Hardwood  Case  has  brought  out  the  nature  of  the 
use  made  of  trade  statistics  by  members  of  the  iiiuerican  Hardwood  I.Ianufacturers* 
Association.  Yvith  regard  to  recox’ts  of  sales  the  sa'ostancs  of  the  great  bulk  of 
this  testimony  was  to  the  effect,  first,  tlxat  by  informing  numbers  of  the  rela- 
tive demand  for  the  different  kinds,  grades,  and  thicknesses  of  liardwood  lumber, 
these  reports  enabled  t'nem  to  adjust  t'neir  production  to  suit  the  demand,  there- 
by avoiding  'onderp- redaction  of  some  items  and  oveiprodv^cticn  of  others;  second, 
that  t'ne  reports  enabled  them,  in  fixing  their  prices,  to  follow  more  closely 
and  quickly  the  general  trend  of  prices,  whet'ner  up  or  down,  on  the  one  hand 
avoiding  sales  at  lo'wer  prices  than  the  condition  of  supply  and  deziiand  seemed 

to  warrait,  on  the  other  'nand  avoiding  prices  that  seemed  hig’ner  than  the  aver- 

2 

age  ran  of  prices,  thereby  preventing  stocks  from  moving  too  slowly. 

Por  instance,  I'lr.  P.  Iv'.  Flatter  stated,  "As  to  the  sales  report  affiant 
says  that  he  regarded  it  as  val'^na'Dle  in  his  'ousiness  operations.  Tlxat  the  data 
thus  funxished  tended  to  keep  him  informed  as  to  the  ci'jaracter  of  the  stocks  that 


Selt,  H.  £.  Address  'oefore  t'ne  I^rdviTOod  I/anufactvjrers’  Association  of  the 
Jnited  S";ates,  Jan  30,  1917.  American  Lumberman,  Feb.  3,  1317. 

2 . 

Oral  argument  of  G.  Carroll  Todd  before  t'ne  Supreme  Court  of  the  United  States, 
American  Column  5:  Lumber  Co.  vs.  U.  S. 


108 


ware  uiost  in  demand,  and  .thereby  he  could  more  effectively  serve  cons -.m^rt ion 
•! 

demands. 

iir.  F.  II.  Stanford  found  the  sales  rer.orts  of  valiie  as  indicatins 

2 

ziie  seneral  trend  of  the  juarket. 

Mr.  E.  A.  Lang  fonnd  the  sales  reports  i:,articularly  valuable  in  de- 
tenrining  the  raaidret  value  of  '.voods  v/hich  wore  infrequently  sold:  ”Tha,t  ffj.ch 

sales  reports  are  of  some  value  to  affiant  in  fudging  the  marhet  price  of  sm.ill 
items  of  lumber  which  constitu-ts  only  a small  percentage  of  our  production,  due 
to  the  fact  that  they  are  generally  iDanu-factu.rsd  from  a scattering  gro-rth  of 
timber,  and  having  only  a few  cars  of  these  items  to  dispose  of  from  time  to 


time,  v/e  are  naturally  not  full3r  informed  as  to  either  the  volume  or  market  con- 
ditions of  these  items.  Such  information  coiild  doubtless  be  secured  from  other 


sources,  but  it  v;culd  take  more  time  and  effort  to  do  so  than  to  get  it  from 

3 

the  sales  reports  irsmticned.  " 

In  one  of  the  meetings  a member  explained  the  value  of  sales  reports 

to  manufacturers  v/ho  only  make  a little  of  any  partici'.lar  wood.  Ee  stated 

thit  they  weald  not  be  corapelled  to  sacrifice  stocks  which  they  did  not  liandle 

reg^'.larly  because  by  glancing  at  the  sales  reports  they  could  ascertain  the 

prices  rrade  on  this  class  of  stocks  by  those  who  were  handling  it  in  large 
4 

qu.antities. 

Reference  to  sales  reports  did  not  almys  result  in  members  raising 
prices.  Sometimes  they  were  lov;ered.  Several  manufacturers,  after  consulting 
sales  and  stock  reports,  found  it  advisable  to  lower  prices  in  certain  instances 


•^'Platter,  P.  M. , P.ecord,  American  Column  & Lumber  Co,  vs.  E.  G.  Yol.  3,  p.l575. 

Stanford,  P.  H. , Eecord,  Yol.  3,  p.  1554. 

^'Lang,  P.  A.,  Record,  Ycl.  3,  p.  1647, 

I 'inu.te s of  Meetings,  Record,  American  Column.  1 Lumber  Co.  vs.  E.  S.  Yol.  1, 
Several  Ifembers  testified  to  the  value  of  sales  reports  in  determining  the 
market  price  of  small  items  of  lumber;  see  Record,  Yol.  3,  p.  1547;  p.  1556. 


I 


"a-  0 »i . 

*.7  TO-  •»  ' ’ . ..  ' ,»  • ^ ■ 


r 


t 


S 


' *1- 


/ 


fjri 

^ ' ’ 1 


■;i.T- 


I 

V. 


109 


order  to  move  their  stocks,  oecause  of  the  discovery  that  their  prices  v/ere 

1 

o\it  of  line  with  those  being  asked  hy  coioi-etitcrs. 

L!Iany  ineiribers  fomd  sales  reports  of  greatest  benefit  when  nsed  in 

connection  with  the  stock  reports.  LIr.  E.  I?.  Ifalwcver  stated  "that  one  of  the 

principal  benefits  of  the  sales  report  and  the  stock  report  used  jointly  was  to 

ascertain  the  iteas  that  were  in  greauest  deuiand,  and  the  items  which  were  short 

in  supoly,  aiid  he  found  these  reports  of  great  value  to  his  firiri  in  deciding 

2 

wiiat  thicknesses  to  manufacture." 

Another  member  found  that  these  reports  furnished  him  with  an  ii'i-centi-c 
to  improve  the  manufacture  of  his  lumber:  "lie  found  these  reports  (sales  reports 

of  use  in  con^oectlon  with  the  stock  reports  in  g-oiding  him  along  the  manufactur- 
ing end.  Etor  instance,  if  he  found  that  certain  firms  were  getting  prices  for 
certain  grades  of  lumber  higher  thai^  he  could  obtain  for  the  same  grades,  he 
found  almost  Invariabljr  that  it  was  because  their  lumber  was  better  manui'actui’ed 
and  mors  strictly  graded  aiid  better  care  taken  of  it  in  curing  and  in  general. 

He  found  these  reports  of  valv.e  to  him  therefore  in  inp)roving  the  manufacture 

and  care  of  his  1-jmber.  ?Ie  found  the  sales  reuorts  also  of  value  in  shewing 

3 

what  territories  were  demanding  certain  species  and  thiclmesses  of  lumber." 

The  stock  repiort  of  the  Americazi  llardwood  lianufacturers’  Association 
has  been  described  as  "one  of  the  most  detailed  and  complete  statistical  reports 

/I 

published  by  axiy  association  in  the  world" 

I>arir:g  1919,  at  least,  members  of  this  association  placed  more  emphasis 


^•Dickinson,  C.  C. , Eecerd,  Vol.  3,  o.  1?1Q;  Static,  W.  Ik,  Eecord,  Vol.  2,  p. 
12S0. 

"^’Dulweber,  B.  E. , Eecord,  Vol.  3,  p.  1555. 

'Z 

'■"GlernL,  E.  C. , Eecord,  Vol.  3,  p.  1552. 

^‘Eecord,  Vol.  2,  p.  1064. 


110 


on  the  valiie  of  the  s^ock  reports  than  they  did  on  sales  reports.  The  reason 

for  this  v/as  that  in  1919,  prices  rose  so  fast  that  sales  reports  were  not  receiv- 

_ 1 

ed  in  time  to  he  of  much  value  as  a grdde  to  the  trend  of  the  market.  The  chief 
benefit  of  stock  reports  lay  in  the  assistance  they  gave  in  determining  what 
kinds  of  luiuher  to  manufacture  and  the  grades  and  thicknesses. 

Ivir.  H.  S.  Weiss  testified  as  fellows:  "I  have  fovmd  this  report  of 

invaluable  assistance  to  me  in  determining  into  what  particular  thisknesses 
and  grades  to  ciannfacture  our  logs.  This  is  a problem  that  is  continually  con- 
fronting us  because  o’ar  profcct  is  not,  as  a rti.le,  sold  until  it  has  been  manu- 
factured and  conditioned,  which  is  possibly  an  average  of  six  months  after  the 
material  is  sa’ved.  I h*ave  found  that  in  the  past,  that  in  the  absence  of  knon^ 
ledge  of  stocks  in  the  hands  of  my  competitors,  that  I would  instruct  our  mill 
to  saw  a certain  thickness,  only  to  find  later  that  the  market  carried  a burden 
of  these  particular  thicknesses,  and  it  was  with  great  difficulty  that  they  could 

be  marketed,  whereas  consumers  were  in  great  need  of  some  other  thicknesses  thiat 

2 

we  could  have  manufactured.  ” 

Mr.  M.  B.  Cooper  testified,  "that  when  the  monthly  report  of  stocks 

reached  his  deic,  he  invariably  checked  it  over  with  a view  of  ascertaining  as 

to  wlat  grades  and  thicknesses  were  piling  up  and  what  grades  and  thicloiesses 

were  becoming  scarce,  and  oftentimes  he  lias  changed  his  sawing  instructions  to 

3 

the  mill  due  to  the  information  obtained  through  these  stock  reports.  " 

It  may  be  remarked  in  this  connection  tliat  this  regulation  of  output 
to  conform  vith  the  consumption  demands  as  revealed  by  the  stock  report  not  only 
results  in  a benefit  to  the  manufactiirer  himself  but  also  to  the  consumer  of 
Itmaber,  for  it  leads  to  the  contiientration  of  prodtiction  on  those  grades  and 

^’Eecord,  Vol.  3,  p.  1633. 

Weiss,  II.  B. , Eecord,  Vol.  3,  p.  1655. 

3.  . 

Cooper,  Ivl.  B. , Eecord,  Vol.  3,  p.  1645. 


Ill 


thicl-niesses  for  vvhicli  there  is  a heavy  deniand.,  instead  of  the  production  of  grades 
and  thicknesses  for  which  the  deinand  is  light,  thus  preventing  an  undue  increase 
of  prices  for  such  grades  and  thicknesses  as  are  in  demand  and  at  the  same  time 
avoiding  an  undue  depression  of  price  of  those  grades  which  are  net  in  demand. 

Other  manufacturers  have  stressed  the  value  of  stock  reports  in  de- 
termining whether  to  hold  or  sell  stocks  on  hand.  In  writing  of  his  opinion  of 
the  Open  Competition  Plan,  ¥x.  H.  B.  Sale  said,  "We  h^ad  previous  to  the  United 
States  entering  the  war,  a customer  who  had  talten  our  production  in  Qa.artered 
V/hite  Oak  strips  bv.t  since  the  war  his  business  has  so  materially  decreased  that 
the  amount  of  stock  required' to  meet  his  production  has  been  very  small.  V/e  are 
therefore  hunting  for  a market  for  such  strips.  Of  course  we  co*ald  dispose  of 
these  to  almost  any  manufacturer  at  the  ordinary  going  price,  bu.t  have  held  them 
for  approximately  ten  months.  ?/e  vTOuld  have  had  to  dispose  of  them  at  a loss  or 
sold  them  at  the  going  market  price.  We  examdned  the  stock  list  carefully  and 
fomd  Qtd.  ?/hite  oak  Strips  in  the  hands  of  manrifacturers  to  be  less  than  normal 
and  therefore  continued  ccc.oting  on  inquiries  the  price  which  we  had®t  on  them 
as  the  price  at  which  \-;e  could  make  a profit  on  these  strips.  This  "Drice  was  in 
excess  of  the  reported  going  price  in  the  Open  Competition  Plan,  bxit  we  were 
quite  satisfied  that  before  sufficient  additional  production  could  be  put  ucon 
the  market  'that  the  price  would  come  to  approximately  our  price  on  the  stock. 

This  arrived  today  as  evidenced  by  the  duplicate  of  our  shipuing  order  mailed 
1 

you. " 

Since  the  Jkierican  I^rdwood  blanufacturers’  Association  did  not  issue 
regaxar  production  reports,  there  are  no  data  available  which  would  show  how  mem- 
oers  might  have  used  information  pertaining  to  production.  However  there  are  data 


1. 

Sale,  I-I.  B.,  Becerd,  Vol.  2,  Exhlb.  No.  1132. 


112 


to  show  in  the  case  of  other  Imiber  associations  what  has  heen  dons  vdth  these 
and  other  rei:crts  at  meetings,  with  a view  of  pointing  o-nt  to  memhers  the  trend 
of  niarlcet  conditions.  It  has  heen  customary  with  most  associations  of  mnufactur- 
ers  to  have  a Liarket  Conditions  Ccm':''ittee  or  the  Secretar:/  raaks  a rep'ort  based  • 
on  a comparison  between  statistics  of  stocks,  production,  orders,  shipments,  et 
cetera,  which  numbers  might  use  as  a guide  to  their  prod'ixction  policy.  The 
following  extract  taken  from  the  Secretary's  report  at  the  midsv.mmer  session  of 
the  Horth.em  Hemlock  and  Hardwood  Ivlaiiufacturers'  Association  hell  in  July  1S12, 
gives  a clear  idea  of  the  various  advantages  flowing  from  a consideration  of  the 
different  kinds  of  trade  statistics  in  relation  to  one  another;  at  the  same  time 
it  is  typical: 

"last  January  there  was  12  per  cent  more  rnsold  hemlock  limnber  on 
hand  than  on  January  1,  1911.-  due  to  the  vei^’'  heavy  hemlock  prodvction  late 
last  fall,  while  there  was  a slight  decrease  in  hardwood  stocks.  Taken  altogeth- 
er, the  Jamar^r  1st  (1912)  reports  showed  an  increase  in  hemlock  and  hardxvood 
stocks  on  hand  of  10  per  cent  over  Janvaigr  1st,  1911.  The  extraordinary  move- 
ment of  k-''mbsr  in  the  last  six  nx>nth9  of  this  year,  together  with  cnl3’’  a normal 
prodmcticn,  have  reversed  these  figiores,  so  that  on  Julg^  1st  there  vn,s  4 per 
cent  less  unsold  hemlock  on  hand  than  on  Jv.ly  1st,  last  j;’ear,  and  28  per  cent 
less  •'msold  hardwood  on  hiand  than  a 3/ear  ago.  Taking  hardv/ocd  and  hemlock  stocks 
together,  sold  and  nnsold,  tlie  totals  reported  by  4d  concerns  was  practically 
the  same  this  year  as  last. 

"Turning  to  our  cat  and  shipments  reports,  from  an  average  of  more 
than  70  firms  during  the  last  t^7elve  months,  however,  we  find  that  during  this 
period  hemlock  shipments  h^ve  exceeded  the  cat  by  13  per  cent  and  that  hardwood 
shipments  have  gone  be3rond  prodaction  by  7 per  cent,  iralrlng  a total  excess  of 


shipments  over  cut  since  July  1,  1911,  of  10  per  cent. 


It  is  especially  inter- 


113 


esting  to  note  that  stock  reports  show  45  per  cent  less  No.  3 unsold  hesalock  on 
hand  July  1st  -this  year  than  on  July  1st,  1911.  Moreover  there  has  been  mch 
moro  effort  on  the  parr  of  buyers  to  contract  stocks  aliead.  TTnlle  large  blocks 
of  heialock  are  seldom  contracted,  nearly  three  times  as  much  hemlock  v/as  sold 
ahead  as  on  the  first  of  July,  1911.  Moreover,  at  this  time,  60  per  cent  of  the 
total  hardvvood  stock  on  liand  is  sold,  while  a year  ago  only  50  per  cent  was  sold 
ahead.  More  lumber  was  shipped  by  the  Association  members  in  T.iay  than  in  any 
other  month  covered  by  our  records,  while  the  June  reports  show  but  a sli^t  de-  • 
crease  from  the  higla  maric  set  by  the  ?,^y  shipments.  A s^jmriing  up  of  the  reports 
by  the  same  firms  in  the  corresponding  first  six  months  of  this  year  and  last, 
indicates  an  increase  in  hemlock  ci;-t  of  11  per  cent,  and  increase  in  hardwood  ■ 
shipments  of  41  percent,  a decrease  in  hardwood  cut  of  13  per  cent,  aii  increase 
in  hardwood  shipments  of  50  per  cent,  making  up  to  date  this  year  a aeorease  in 
total  cut  of  2 per  cent,  and  an  increase  in  total  sliipments  of  37  per  cent  over 
the  corresponding  period  of  1911.  There  is  no  doubt  that  the  total  hardwood 
production  in  1912  will  be  less  than  in  1911,  and  so  far  as  can  be  determined 
the  same  will  be  true  of  the  hemlock  cut." 

DISADVANTAGES 

The  disadvantages  connected  v/ith  open  price  work  may  be  conveniently 
grouped  'under  the  following  heads:  first,  handicaps  to  txie  installation  of  an 

open  price  system;  second,  negligence  of  members  in  tlae  performance  of  obli^- 
tions;  third,  deficiencies  in  the  reporting  system. 

The  two  chief  handicaps  to  the  installation  of  open  price  associations 

1. 

American  Lumberman,  July  27,  1912. 

2.  ' 

*A  short  account  of  the  uses  of  reports  of  costs,  purchases,  labor,  credits, et 
cetera  is  fo\nd  in  cbapter  5,  pp.  92-95  . 


iJJll 


fo 


114 

rray  "be  attributed  to  a disinclination  of  business  men  to  aff  iliate  themselves 
with  such  an  association  and  to  the  obstacles  offered  by  the  nature  of  the  in- 
dustry to  be  organized,  blanufactu.rers  be  deterred  from  joining  an  or.cn  price 
accociation  for  a number  of  reasons.  A dee;,  seated  distrust  and  suspicion  of 
his  conroetitors  may  suffice  to  keep  them  away,  or  a rai  scon  cent  lor.  of  the  ciiarac- 
ter  of  the  association,  or  the  expense  connected  therevdth,  or  a foar  of  arcusing 
the  hostility  of  customers;  or  of  c-oming  in  contact  with  the  long  arm  of  the  law. 
Sgealcing  of  the  difficulty  of  installing  an  open  price  association,  a pioneer  in 
the  open  price  movement  says,  "It  has  always  proved  exceedingly  difficult  to  es- 
tablish, because  sruspicion,  jealousy,  and  doubt  in  tho  minds  of  competitors  must 

first  be  done  away  with.  **♦*  + ♦♦  number  of  cases  the  has  been 

^ . 1 
tried  and  then  dropped  because  of  the  r.arrov;minded  attitu.de  of  rivals.”  As 

previously  intimated  this  tendency  toward  secretiveness  has  been  particularly 

ncticeaole  in  the  textile  field.  The  explanation  given  has  been  that  tills  busi- 


ness depends  for  its  success  to  an  ■'onusual  degree  upon  the  individuality  in  the 
goods  produced,  cojupetltors  oeing  therefore  reluctant  to  show  comoetitors  tlie 
product  of  their  looms. 

Ml  sconce  ■■•t  ion  of  the  character  of  open  price  associations  is  tho  rule 
..ather  than  uhe  exception.  It  is  extremely  diffictilt  to  convince  a prospective 
member  that  the  open  price  system  is  not  a price  fixing  scheme.  If  he  is 
aiixious  to  control  prices  he  may  become  a member  with  that  end  in  view.  There 
are  nearly  always  some  members  of  open  price  associations  who  are  constantly 
tr^/ing  to  use  the  association  as  a means  of  stifling  competition,  - attemxjting 

1. 

Gaunt,  E.  H.  An  Open  Price  Plan  for  V/oolens  and  Worsteds,  Textile  World 
ounial,  A r.  u,  ISIS,  p.  1709. 

Ja'.rnal  of  Co.-meroe,  Lay  22,  1919. 


€ 


k;-' 


1"' 


-i: 


. .•  . .4^ 


•'  . U -•  1 


S^.y 


w X <1*4. 


r j»  ••  (“>  ® ^ 


0?  ■ . ii.-:  J 


’ 0.  *0.  Ji: 


M .'»i  .’  "S-b 

'.  I ■ ^'t,d  i"jv". 


' •■  -;•>  ' ,•»■ 
^ »•  »-•«  ^ w A 


:i  .1  v:;rt  w -i  . ; 


:»  a 

I j 

^ j 

! I 


— #•  < 


■>.  • 4<-' 


s»:  J 


to  oring  a'Dout  agraen^snts  tliat  will  just  avoid  tbs  Sberran  Law  restrictions  and 

1 


still  go-a^e  profits  rndnly.  Undou'otsdly  thsse  aousers  of  the  opsn  price  system 
are  its  vvorst  enemies.  Business  men  who  aim  to  oe  strictly  law  abiding,,  olservii'^ 
as  they  do,  the  -mlawful  activity  of  these  lawbreakers,  j-amn  to  the  conclusion 
that  all  open  price  activity  is  sta:j.ped  with  the  same  illegal  ch.aracter  and  they 
are  not  easily  pers-.in.de d to  join.  This  is  parti c-olarly  true  if  their  exper- 

ience with  price  fixing  plans  has  been  unfortunate.  One  member  of  the  An.erican 
Hardwood  lian-afacturers’  Association  expressed  the  feeling  of  this  class  of  men 
when  he  wrote  to  the  i^nager  of  Statistics  as  follows: 

’'Oi;.r  experience  wdth  various  price  fixing  plans  in  the  early  days  were 
humiliating  and  costly,  and  for  that  reason  we  stood  off  from  this  Opsn  Coiipsti-. 

tion  Plan  for  some  time,  but  we  finally  went  into  it,  the  exact  date  -we  do  not 
2 

remember.  ” 

The  expense  involved  in  belonging  to  an  ojjen  price  association  will 
prevent  sorme  business  men  from  affiliating.  The  cost  of  rcnning  such  an  associa- 
tion as  estimated  by  Bab son’ s Statistical  Organization  is  modest.  They  state 
that  the  cost  of  organization  began  in  one  case  with  a fee  of  $3000.00  for  co'cn- 
sel,  that  the  first  expenses  were  rather  large,  but  that  $700.00  a month  should 
cover  all  exp^enses.  Of  course  this  was  v/ritten  in  1915  when  the  price  level 

was  considerably  lower  than  it  nov/  (1921)  is,  and  the  figures  were  urobably 

3 

given  for  an  association  with  a membership  of  not  more  than  tv/enty-five.  iJot- 
v/ithstanding  these  circoimstances,  the  pro  rata  expense  cannot  be  considered  -on- 
c5u-ly  laeavy  and  u,r6bably  is  not  a serious  drawback  to  spread  of  the  open  price 

n 

• 

Journal  of  Commerce,  Dec.  14,  1915. 

2. 

ITigh,  Ti,  H. , Becord,  Aiueri can  Col.  d Lum.  Co.  vs.  U.  S. , 

1127. 

3. 

P-abson,  B.  W. , Bsports  on  Cooxjeration,  C.  C-3. 


Vol.  2,  Exhib.  ‘To. 


116 


iiiovement . 

'Ihe  fear  of  arousing  the  opposition  of  b-ayers  is,  in  soBie  cases,  at  least, 
a powerful  deterrent  to  the  spread  of  the  cioveioent.  In  the  textile  industry,  in 
particular,  this  opposition  has  assujred  fonrldable  proportions.  In  this  field  the 
opposition  iias  been  inspired  either  by  the  knowledge  on  the  part  of  buyers  that 
open  price  n^ethods  would  prevent  them  from  making  further  profits  as  a result  of 
the  ignorance  of  sellers,  or  it  I:as  been  inspired  by  the  feeling,  fostered,  first, 
by  the  s ecret  methods  pursiied  by  seme  so-called  open  price  associations,  second, 
by  the  indiscreet  tallr  of  certain  members  of  these  associations,  that  they  v/ere 
being  made  the  victims  of  v/hat  amx'unted  to  a conspiracy  to  maintain  or  raise  prices 

The  follo'ving  extract  taken  from  an  editorial  vyhich  appeared  in  the 
Journal  of  Comuerce,  December  14,  1S16,  pictures  the  sit-’oation  as  vieveed  from  the 
standpoint  of  the  buyer  wlac  feels  himself  victimised:  "Fnat  has  occurred  in  cer- 
tain trades  is  this:  the  mamifacturers  have  laid  certain  cards  on  the  cable,  but 

they  are  hiding  every  detail  of  the  game  from  the  buyers  who  are  their  customers. 
This  is  a violation  of  -the  open  price  spirit  and  gives  ju.stification  for  a sits- 
picion  that  things  are  not  in  accordance  with  tlie  law.  Statements  to  tiie  effect 
that  no  violation  of  the  lav/  is  intendcdvill  not  convince  buyers  who  feel  that 
they  are  entitled  to  know  most  of  the  influences  tlxit  affect  the  value  of  the  mer- 
charciise  they  want  to  buy. 

"Within  a short  time  certain  ma.Tafacturers  who  are  in  trade  organi ca- 
tions h-ave  done  considerable  boasting  as  to  what  they  proi^osed  to  do  to  buyers 
because  of  ‘heir  new  allegiance  to  the  principles  of  the  open  price  movement.  A 
doubt  exists  as  to  wl:ether  these  manufacturers  really  know  v/l]at  aii  open  price 
association  car-  do  and  ho-w  easily  their  membership  in  such  a body,  taken  in  con- 

1 

Junction  mth  statements  of  the  c’*na,racter  indicated,  can  latid  all  hands  in  jail." 

X « 

Journal  of  Commerce,  Dec.  14,  19 IS. 


===== 

117* 


The  attitade  taken  oy  ^he  llauional  Association  of  Pnrcliasing  Assents  to- 
Y/ard  the  open  iDrice  movement  is  indicated  in  tlis  extract  talcsn  from  a letter  re- 
ceived by  the  wx’iter  which  follows: 

"The  question  came  up  indirectly  in  our  last  convention,  when  a proposal 
was  made  that  we  organize  a bureau  to  report  the  orders  placed  and  prices  paid  by 
cur  members  in  various  localities  for  specific  corarcdltios.  After  irature  dis- 
cussion aitd  later  consideration  by  the  Sse c-.t ive  Committee,  it  was  decided  that 
such  a plan  offered  prospects  of  violation  of  the  existing  laws  against  'onfair 
competition  and  the  matter  was  therefore  definitely  dropped  by  our  association. 

"I  am  reasonably  confident  that  there  are  no  associations  of  purcliasing 

agents  engaging  in  any  way  in  open  price  work.  On  the  whole,  the  viewpoint  of 

purchasing  agents  is  opposed  to  s'och  association  activities.  The  real  function  of 

the  open  price  association,  asv/esee  it,  is  to  permit  prodocers  to  clmirge  I’or 

their  comri.odities  not  on  the  basis  of  their  production  costs  or  real  competition 

values,  but  on  a basis  of  all  tltat  the  market  will  stand.  Naturally  purchasing 

1 

agents  cannot  be  expected  to  sympatliiss  with  this  viewpoint." 

Tear  of  Government  action  is  perhaps  the  most  powerful  deterrent  to  the 
spread  of  open  price  work.  In  tlois  connection,  I.ir.  Belt,  Chief  Accountant  of 
the  Federal  Trade  Gooinission  once  said,  "As  a result  of  the  conflict  in  the  past 
between  business  men  aiid  the  Government,  many  business  men  have  become  suspicious 
of  cooperation  and  are  led  to  think  tint  because  some  forms  of  cooperative  effort 
liave  oeen  condemned  the  Govemmnont  was  opr-.osed  to  all  forcis  of  cooperation, 
nif ort'onately  as  a result,  some  are  rel^ictant  about  joining  Iheir  trade  associa- 
tions for  fear  that  they  would  be  censured  by  the  Government  for  meeting  v/ith 


Boffey,  L.  F,  Secretary,  National  Association  of  Purchasing  Agents,  Letter 
dated  Feb.  11,  1321. 


118 


1,  3 

t I'.e  i r CO  ra":  s t i t o r s . " 


A furtlxer  deterrent  is  due  to  the  waknese  of  the  voluntary  association. 
The  indiscreet  remrks  of  one  or  tv/o  rr.em'bers  inarj  Involve  the  v;hcls  association  in 

<7 

litigation. 

The  nature  of  the  industry  .my  be  such  as  x;  o mite  it  ozceedlngly  diffi- 
cult to  do  open  price  work  with  any  degree  of  success.  There  may  he  too  many 
different  articles  or  styles  or  grades;  or  the  competitors  my  he  too  n’^uaerous 
and  widely  separated.  Ivn.  K.  H.  hernett,  Secretary  of  the  California  U?holesale 
Grocers’  Association  writes,  "Tith  ray  vdiolesale  distributive  constituency  open- 
ness of  price  infoxuatlon  is  impracticable, " by  reason  of  "the  great  number  and 

variety  of  articles  handled,  the  nurcliase  of  fluctuating  uossihillties  and  quality 
4 

differences."  Members  of  the  Pennsylvania  Division  of  the  National  Association 


of  Hosiery  and  Underwear  Manufacturers  once  discussed  the  practicability  of  adopt- 
ing the  open  price  system  bu.t  tlje  project  ms  abandoned  as  sentiment  vjas  general 
that  the  great  variety  of  styles  and  grades  characteristic  of  the  underv/ear  indus- 


try wou.ld  require  too  complicated  a system  to  make  it  of  any  value  to  the  members. 
The  J\merican  MarGivood  Manufacturers'  Association  found  the  effectiveness  of  its 
’,voru  exceedingly  impaired  because  of  the  great  number  of  competitors  in  the  liard- 
wcoi  industry  and  because  of  the  fact  that  tlxey  were  for  the  most  part  isolated 
from  one  another.  The  industry,  in  1912,  comprised  between  12,000  aixd  15,000 


1.  ^ ^ 

Belt,  R,  E., Address  before  the  Hardwood  Manufacturers’  Association  of  the 
United  States,  Amex-ican  Lumbemm,  Peb.  3,  1917. 

2. 

The  attitude  of  governmental  bodies  is  discussed  in  chapter  8,  pp.  188-193. 

5.  . . 

Tnis  matter  is  discussed  in  chanter  4,  pu.  50-53. 

4.  - / 

’Letter  dated  Dec.  20,  1S2C. 

5. 


Ei-monthly  meeting  of  the  Pennsylvania  Undeiv;ear  Lhin-'afacturers ' Dlvisicu  of 
the  national  Association  of  Hosiery  and  Underwear  I,.anufacturer8,  Jan.  13,  1017. 
Textile  Uox’ld  Journal,  Jan.  20,  1917,  p.  35. 


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119 


inde-^ender.t  -units.  These  -units  -»vere  scattered  over  practically  the  entire  United 

States  east  of  the  Mississippi  River  and  v/est  of  the  Mississippi  in  the  States 

of  i.lissc'uri,  Arkansas,  LOt-Asiana  and  Texas.  Effective  cooperation  between  all 

1 

of  these  -units  was  well  ni^  lir.p0  3sil-le. 

The  national  Bottle  I.anr^act’arsrs*  Association  foiund  it  impracticable 
to  adopt  the  open  price  sj’-steir-  in  its  entiret3r  for  the  reasons,  as  expressed  by 
the  secretary  tliat,  "The  open  price  plan  can  only  be  snccessf-'illy  operated  -.mder 
certain  conditions.  These  ccnditicns  re^pudre  a concparatively  small  membershi-D  - 
a fairly  large  -unit  of  sale  - and  a -uniformitj’-  of  prod'ACt.  In  air  case  v/e  have 
a rather  large  membership,  there  being  about  fifty  si'bscribers  to  oiir  special 
f-u.nd.  T’nere  are  a great  man^/ "me dinm  and  small  sized  sales  so  that  the  volume  of 
b-iisiness  to  be  recorded  v.o-ald  be  verjr  large;  and  finally  we  have  a wide  diver- 
sity of  interest  airnng  the  members.  Some  members  are  malting  only  one  class, 
others  are  making  three  or  four,  while  othjers  malie  all  eleven  classes.  Eeca-use 
of  these  conditions  we  feel  it  would  not  be  a practical  plan  to  even  consider 
the  operation  of  the  open  price  plan  for  the  main  association.  " 

The  nes^igence  shown  in  the  performance  of  obligations  is  of  sufficient 
gravity  to  lead  some  perscns  to  believe  that  the  vcli-ntary  form  of  association 

rr 

w 

is  deemed  to  failure  on  this  score  alone.  This  negligence  is  chiefly  marked, 
first,  bj'  poor  attendance  at  meetings;  second,  by  extreme  laxness  in  fri.mishi-iig 


1 . 

Gadd,  E.  R. , Record,  American  Colrmn  and  L'amber  Com"an.3»-,  vs.  U.  ?.  Vcl.  2, 

p.  1008. 

2. 

Stevenson,  C.  R.  The  Eliruination  of  Unfair  Competion  , Address  delivered 
before  the  Fational  ottle  Mom.-ifacturers’  Association,  lay  1,  1920. 

rr 

• 

-Ir.  Aiu.strcng  of  the  Am\strong  Bureau  of  Related  Industries  voices  this 
opinion. 


’■T : 

i 


12C 


the  rervv'.ired  reports  to  the  secretary.  laxness  in  furnishing  reports  may  he  due 
either  to  carelessness,  indigence,  or  a deliberate  resolve  to  withhold  certain 
kinds  of  info rrrat ion. 

One  cannot  read  the  accoirnts  given  in  trade  Jcurrals  of  open  price 

meetings  without  noticing  that  secretaries  are  constantly  hewailing  the  failttre 

of  meirhers  to  attend  meetings.  Of  the  320  members  whc  helcnged  to  the  ihrerican 

Kardv.'ood  LlaCTi’acturers’  Association,  120  never  attended  a meeting  and  50  attend- 

1 

ed  h*::t  one  meeting.  The  Arrr.strong  Sureau  of  Related  Industries  has  sor^ht  to 
insure  better  attendance  at  meetings  hy  imposing  fines  on  those  who  absent  them- 
selves or  come  tardy. 

Secretaries  also  are  constantly?"  admonishing  members  to  be  more  prompt 

and  regn.lar  in  submitting  reports.  In  this  connection  the  secretary  of  the 

ITorthem  Hemlock  and  Hardwood  llan'ji’acturers’  Association  writes,  ”7/e  now  have 

about  ninety  members,  and  of  these,  abo\*t  fifty  are  reporting  their  sales  and 

these  are  the  only  ones  which  receive  the  information  in  the  Sales  3r.lletin. 

It  is  open  to  any  of  the  others  whenever  they  desire  to  report  their  sales.  If 

this  requirement  were  not  mde,  it  would  be  very  difficult  to  get  any  of  the 

2 

firms  to  m*ake  the  reports." 

The  secretary  of  the  California  Thite  & Sugar  Pine  I.'IanT'ifactum'ers' 
Association  v/rites,  "Vfe  have  never  yet  had  fifty  per  cent  of  our  members  submi 
statistics  effective  the  same  date  and  those  received  are  never  corrmlete.  Pith 
regard  to  prices,  w©  liave  requested  members  to  send  in  to  this  office  copies  of 
their  orders  to  be  tabulated  and  returned  to  them;  at.  weekly  intervals.  At  the 

1. 

Argum^ent  of  L.  C.  Boyle  in  the  Sapreme  Court  of  the  United  States,  Amierican 
Column  & Lumber  Co.  vs.  U.  S.  c.  34. 

2. 

Swan,  0.  T. , Letter  dated  Jan.  4,  1921. 


121 


1 

present  time  a'ocnit  five  ont  of  forty-eight  are  doing  this." 

In  one  of  their  meetings,  the  secretary  of  the  West  Coast  L->3inber 

l/Ianiifacfarers’  Association  said,  "It  is  to  he  regretted thmit  we  cannot  get  all 

the  mills  to  report  within  reasonable  time.  ******  of  the  reports  for 

as  far  hack  as  October  1912  are  not  in  j’-et,  and  ?;e  are  still  working  on  them. 

2 

We  ’nave  sent  as  high  as  six  reqy.ests  vAthx)nt  receiving  any  reply." 

I'lr.  \lm,  J.  liathev/s,  counsel  for  several  of  the  Eddy  associations  ad- 
mitted 'oefcre  the  Lockwood  CoTi5''^.ittee  that  memhers  did  not  always  make  a renort 

*7 

to  the  secretary  of  corrected  hide.  There  is  hardly  an  open  price  constitution, 
coming  v/ithin  the  notice  of  the  writer,  th^t  does  not  tal:e  cognizance  of  this 
negligence  in  reporting,  hy  providing  t’nat  memhers  who  do  not  frdnish  informa- 
tion Bh.all  receive  none.  In  addition  memhers  of  the  Zhit  Goods  Lhnufactr.rers  are 
required  to  sign  a statement  reading  as  follows:  "I  hereby  agree  that  I i^lll  he 
responsible  either  hy  personal  attention  or  delegation  to  some  partic--lar  person 
in  my  employ  to  see  that  any  and  all  quotations,  prices,  rebates,  or  any  other 
condition  covering  quotation  or  sales  vdiich  differ  in  any  way  from  prices,  con- 
ditions, etc. , on  file  at  any  tim,e  with  the  Association  are  fom'/arded  to  the 
office  of  our  Association  vdthin  twenty-four  hours  from  the  time  such  changes  are 

made.  I further  agree  that  this  agreement  is  binding  as  longr  as  mj’’  mill  is  a 

4^  5 

Eegnlar  Ivlemher  of  the  Knit  Goods  ^manufacturers  of  Ar.erica.  " 

1. 

Smith,  C.  Stowell,  Letter,  dated  Dec.  3,  1920. 

Ihis  report  was  made  in  1913  at  the  :>!^rch  meeting.  See  American  Lumberman, 
April  5,  1S13. 

3. 

Testimony  of  Win.  J.  llattiews,  Record,  New  York  Joint  Legislative  Committee  on 
Housing,  Dec.  29,  1920,  p.  4635. 

4. 

Amsndr.ent  to  Constitution,  Textile  World  Journal,  T.!^y  17,  1319. 

5. 

Eor  other  instances  of  negligence  in  reporting  see,  American  Lumberman,  Eeb. 

10,  1917,  Nar.  29,  1913,  Nov.  2,  1912.  ' 


A ^ 


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122 

In  some  cjo-arters,  at  least,  members  a_3pear  to  be  intentionally  de- 
ceiving other  members  about  the  nature  of  their  transactions.  This  is  done  by 
omiting  from  their  reports  any  lo;v  sales  or  exceptiorjil  iiscoi;nts  tliat  may  have 
been  made.  This  abuse  is  of  a most  serious  character  because  it  tends  to  under- 
mine the  spirit  of  confidence  and  trust  that  nmst  be  developed  to  a considerable 
degree  before  much  progress  in  open  price  work  can  be  made.  One  open  price 
secretary  informed  the  writer  that  dishonesty  in  reporting  is  very  prevalent, 
and  is  to  be  ascribed,  he  thought,  to  the  fact  that  members  are  ashamed  to  turn 
in  reports  of  low  sales.  In  the  textile  industry  complaints  frequently  arise 
that  members  do  not  report  discounts  that  have  been  made.  One  imrcortant  textile 
manufacturer  is  quoted  as  s&ying,  "I  do  not  want  my  fabrics  filed  ?/ith  this 
Association.  It  might  ce  different  if  ;’’ou  could  get  the  whole  truth  from  all 
cormetitors,  bict  do  you  thinlc  that  sellers  a re  going  to  tell  the  five  per  cent 
'inside'  they  are  giving  John  Jones  or  the  ten  per  cent  that  Tom  Smith  gets? 

To  be  sure  they  will  report  the  open  market  price,  but.  it  is  just  these  private 
terms  that  make  conmetition  so  hard  in  the  marketing  of  wool  goods,  aiid  they 

will  oe  jusu  as  much  of  a factor  whether  there  is  an  open  r^rice  association  or 
not . " 

In  one  of  the  meetings  of  the  I.^ichigan  Hardwood  Ifeinufacturers'  Associ- 
ation the  Secretary  gave  vent  to  the  following  vigorous  language;  *'In  this 
connection  it  is  -vvell  to  state  that  certain  members  of  the  Comnlttee  have  know- 
ledge of  sales  made  by  a few  members  at  low  prices  that  have  not  been  reported 
to  the  secretary.  Wo  one  is  obliged  to  get  the  list  prices,  but  everyone  lias  a 
moral  obli.gation  to  report  all  sales.  There  is  absolutely  no  other  accurate  way 

1. 

Textile  World  Journal,  Aug.  12,  19ie,  p.20. 


123 


to  determine  the  market  conditions,  and  it  is  a distressing  com- entary  on  the 
loyalty  of  some  of  our  members  to  say  that  this  comrrjittee  mast  "gumshce'* *  around 
the  trade  for  x^rice-sale  irifcrmation.  Any  meirher  sacrificing  stock  does  him- 
self and  the  association  less  injury  '03^  franl^ly  acknowledging  the  transaction 
than  he  does  by  ccvering  it  up.  Aii3^  member  v/ho  -persistently  covers  up  such 
transactions  may  justly  be  sn^^ected  of  tr3ung  to  take  advantage  of  other  mem- 
bers who  are  not  only  trying  to  get  a fair  price  for  their  goods  but  who  also, 
when  necessity  constrains  them  to-  a sacrifice,  rmiloe  aieport  of  it  to  the  Associa- 
tion, thereby  putting  all  members  in  a position  to  know  the  real  conditions. 

Secrecy  will  ultimately  reflect  more  real  inj^ery  unon  the  culprit  than  ucon  his 

1 

associates  whom  he  1-as  misled  by  his  silence.' 

At  the  time  when,  rath  the  help  of  lb:.  Eddy,  the  old  Yellow  Pine  Asso- 
ciation was  being  reorganized  into  vshat  later  became  the  Southern  Pine  Associa- 
tion, it  was  brought  owt  in  the  presence  of  !.Ir.  Eddy  that  under  the  old  form 
of  association  the  practice  had  oeen  to  send  to  the  secretary  copies  of  all  or- 
■lers,  but  tnat  very  soon  it  developed  that  only  a few  of  the  large  operators 

O 

sSiit  j.n  this  information,  and  that  they  reported  only  the  crea-ii  of  their  orders. 

Cogi-iizaiice  of  this  abuse  is  talcen  in  some  constitutions.  One  consti- 
tution, for  example,  provides  that  miembors  who  file  misleading  information  ;vill 

.3 

be  dropped  from  membership.  Another  means  often  resorted  to  in  order  to  en- 
courage honesty  in  reporting  is  to  not  show  figixres  of  individ-oals  in  the  com- 
piled reports  issued  from  the  secretary's  office. 

The  reporting  system  is  in  many  instances  deficient  because  reports 


American  lumberman,  Oct.  23,  1915. 

O 

• 

Ibid,  Pec.  20.  1913. 

3. 

E3/-iaws,  Society  of  I/IanvJ'acturing  Conf ecti  oners.  Sec.  S. 


124 


are  eitiier  iiiaccurate,  or  obsolete  or  the  Inforrnation  contained  therein  Is 
not  comparable.  Some  secretaries  have  frankly  admitted  to  the  writer  tliat  mem- 
bers are  not  as  caref^-iJL  abont  siibroittlng  acc-ca*ate  reports  as  they  shonld  be. 
Oftentimes  the  fault  is  due,  not  to  carelessness  but  to  an  inadquate  system  of 
account  keeping  which  malr.es  it  nearly  impossible  to  sr’.bmit  anything  more  than 
mere  estimates. 

If  the  industry  is  such  that  -//ids  and  sudden  fluctuations  occur  in 
the  price  of  the  product,  it  is  fcrond  difficult,  if  not  impossible,  to  sales 
reports  in  the  hands  of  members  in  time  to  be  of  any  value  in  gau.ging  the  trend 
of  the  market.  This  is  particularly  true  if  the  membership  is  large  and  wide- 
spread, as\’©,s  the  case  with  the  American  EardxTCCd  IvJanufactujrers'  Associa'cion. 
decause  of  the  vast  number  of  reports  of  sales,  to  be  arranged  and  compiled,  the 
IJanager  of  Statistics  found  it  impossible  to  mail  reports  to  members  oftsner 
than  once  a week.  The  reports  came  out  too  infrequently  to  be  of  use  as  a guide 
in  (quoting  prices.  This  v;as  particularly  true  in  the  latter  part  of  1912  and 
the  early  part  of  1920  when  prices  for  l;umber  rose  almost  daily.  Considerable 
testimony  was  given  to  show  the  obsolete  character  of  these  sales  reports.  A 
few  of  the  more  representative  statements  are  as  follows: 

Kr.  J.  T.  Holloway  testified,  "As  to  the  ^les  Report,  affiant  says 
that  under  normal  conditions  this  data  v/cuLd  be  of  value  in  that  it  Vi/ould  give 
a mill  operator  an  understanding  of  the  market  tendency.  Hbr/ever,  lunder  the 
abnormal  conditions  that  have  existed  for  the  last  four  or  five  months,  the 
Sales  Reports  are  practically  of  little  value,  because  v7hen  thej/"  reach  the  mem- 
bers they  are  from  ten  days  to  two  weeks  old  and  the  date  is  such  -cast  history 

1 

that  it  is  of  no  practical  worth. 

1. 

Record,  Ainerican  Column  & L-omber  Co.  vs.  U.  S. , Vol  . 3,  p.  1551.  This 
affidavit  was  filed  liar.  9,  1920. 


125 


I'lr.  S.  A.  'Jilllaais  said,  "Affiant  states  that  he  has  alv/ays  carefiilly 
read  the  sales  reports  issued  "by  the  Qx^en  Competion  Plan,  hut  he  has  fo^ond  that 
they  report  sales  as  of  ten  days  to  t?;o  weeks  past,  and  that  they  do  not  reflect 
the  present  condition  of  the  rrarket  at  the  time  of  reading,  and  conseqixently  the 
benefit  derived  was  exceedingly  limited.  It  is  the  opinion  of  affiant  tliat  any 
l-jinher  producer  using  the  prices  reported  in  these  sales  reports  as  a guide 
would  have  in  the  majority  of  cases  in  the  past  few  months  at  least  have  sold 

T 

a. 

his  lumber  for  $5.00  to  $10.00  per  thousand  under  the  market." 

G.  W.  likerts  testified,  "In  reference  to  the  sales  reports  affiaiit 

desires  to  state  that  he  considers  tlxat  the  sales  data  exhibited  hy  this  sales 

report  is  from  one  to  t^vo  weeks  behind  the  current  market,  but,  affiant  states 

that  he  does  consider  the  reports  of  value  as  indicating  the  trend  of  market 

conditions,  but  that,  in  so  far  as  being  an  accurate  guide  as  to  what  today’s 

prices  are,  they  are  of  very  little  assistance,  and  this  as  stated  on  account 

of  the  rapid  changes  due  to  the  enormous  demand  and  the  lade  of  hardwood 

2 

supplies  throughout  the  country. 

In  many  cases  it  is  fo’cnd  extreriely  difficult  to  get  products  so 
standardized  as  to  malee  reports  of  sales  coitparable ; hence  their  effectiveness 
is  very  materially  diminished.  Sxich  was  the  case  with  reports  of  sales  issued 
by  the  American  Hardwood  iv'^iufacturers’  Association.  The  whole  lumber  industry 
has  made  tremendous  strides  in  the  standardization  of  grades  yet  the  specifica- 
tions laid  down  are  not  so  severe  but  that  there  may  be  found  differences  in  the 
(jaality  of  lumber  within  each  grade.  These  differences  are  enough  to  detract 

X . 

roid,  Vol.  3,  p.  1639.  Affidavit  filed  liar.  S,  1920. 

^ « 

Ibid,  Vol.  3,  p.  1633.  Affidavit  filed  Liar.  9,  1920;  see  also  Vol.  3,  pp.  1530 
1553,  1539. 


* jUiLn 

ikSMHIl 


126 

consideraljly  from  the  value  of  sales  reports  as  is  indicated  "by  the  f.ollovdng 
testimony: 

I.Ir.  H.  G.  Garrett  said  that,  ’’the  difficulty  with  reported  prices  lies 

in  the  lack  of  tuniforriiity  of  grade  in  hardwood  l^uiriber.  As  a concrete  exacrple 

V 

affiant  states  that  in  the  grades  of  lumber,  he  has  freqi;.ently  fo-jnd  it  cheaper 

to  pay  some  raan-ufactrerers  from  $10.00  to  $15.00  a thousand  more  for  the  so-called 

same  grade  than  others  7/hose  lumber,  though  of  the  same  alleged  grade,  is  really 

1 

of  inferior  q-nality.  ” ' 

One  firm  wrote  to  the  Tanager  of  Statistics  as  follows:  ”’fe  are  young 

in  the  hardwood  game,  but  find  more  or  less  manipulation  of  grades,  and  this  re- 
duces the  value  of  the  price  information,  as  a mill  soiling  #1  Oak  at  $26.00  at 

the  mill  may  act-^mlly  be  receiving  more  money  for  his  stock  than  some  other  mill, 

2 

v?ho  has  accepted  an  order  for  a National  grade  at  $28.00.” 

iTne  list  of  disadvantages  here  reviewed  is  s^afficiently  formidable  to 

malie  it  appear  tlmt  the  fate  of  onen  erice  associations  in  some  industries,  at 

3 

•least,  is  somewhat  'uncertain.  Probably  all  of  the  disadvantages  na:r.sd  are  not 
apjplicable  to  ail  open  nrlce  associations.  Ilndci/btedly  the  larger  associations 
find  themselves  more  Imrassed  in  this  respect  than  do  the  smaller  ones.  In  the 
opinion  of  the  writer  the  most  serious  v/eaknesa  of  open  price  work  as  it  is  con- 
dactod  is  the  exhibition  cf  a lack  of  good  faith  among  members,  displaying  itself 
chiefly  in  an  attempt  to  deceive  each  other  by  filing  misleading  information. 

This  attitude  is  undoubtedly  a heritage  of  the  old  cempetitive  regime.  Irr.b\’ed 
as  they  have  been  v/ith  an  antagonistic  sr'irit  toward  one  another,  venting  itself 
in  falseness  and  trickery,  it  v/ould  be  a matter  cf  s".irrrise  if  this  feeling  shorkd 


1. 


Pecord,  Yol.  3,  p,  1722. 

2. 

rilliams,  S.  A.,  Pvecord,  Yol.  2,  Exliib.  No.  1154. 

3. 

The  uncertainties  attendant  upon  the  doubtful  legality  of  open  price  work  are 
reser/ed  for  later  discussion.  See  charter  8,.  pp.  161-175. 


127 


have  died  ovt  in  the  short  s-pace  of  the  nine  years  in  ’vhich  open  price  work  has 
"been  in  onlstence.^  It  is  thought  that  as  inerhoers  oecctne  troly  educated  to  the 
advantages  accruing  from  open  price  'Aorh  and  con'.e  to  realize  that  this  work  cannot 
thrive  in  the  presence  of  falseness,  deceit  and  laxness  of  perfcrnance  of  duties, 
they  vdll  drop  the  practices  which  nov/  seem  consequential  enough  to  threaten  the 
very  existence  of  the  open  price  institution.  The  OTjen  price  movement  is  still 
too  rrrcch  in  its  infancy  to  warrant  one  in  casing  predictions  of  its  success  or 
failure  on  any  data  so  far  accromulated. 

1. 

This  statement  is  made  in  1921. 


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128 


CH.^TEH  VII 

CPSII  PRICE  ACTIVITY  IN  THE  liJl'IBER  lEPJSTHY 

The  wealth  of  data  disclosed  hy  recent  ■G-ovemmont  Investigations  into 
the  l-Limoer  industry’-  talcen  together  v/ith  the  vast  amount  of  evidence  collected 
in  the  case  of  the  United  States  vs.  the  im-.erican  Hardwood  llannlacturers’ 
Association  renders  it  possidLe  to  get  a view  of  the  operation  of  the  open 

price  system  in  this  industry  such  as  no  other  industiY?-  has  yet  afforded. 

1 . 

In  another  connection  it  has  “been  pointed  cut  that  open  price  v;ork 
in  the  luihber  industry  is  almost  entirely  limited  to  associations  of  manufac- 
turers. In  a survey  made  hy  the  American  Limibernan  in  1917  it  was  found  that 
twenty-seven  associations  of  manufacturers  were  in  existence  at  that  time. 

The  highest  membership  of  any  one  of  these  orgsnizatlcns  reporting  v;as  892; 
the  lowest,  ten.  There  was  an  average  percentage  of  fifty-eight  members  to 
one  hundred  eligibles.  The  average  age  of  the  associations  \me  8.85  years. 
Twenty- tvv'o  associations  were  organized  previous  to  1917.  Of  the  twent j’^seven 

associations  two  were  orpranised  in  1889,  one  in  1891,  one  in  1S97,  but  all  the 

2. 

others  are  less  than,  twenty  years  old  and  seventeen  less  than  ten. 

A few  of  the  more  unimportant  associations  appear  not  to  have  operat- 
ed open  price  sj’’stems,  but  the  leading  ones  have  done  so.  The  recent  investi- 
gation of  the  Federal  Trade  Commission  disclosed  that  all  of  the  principal 
regional  associations  belonging  to  the  National  Lumber  Ifenufacturers’  Associa- 
tion have  been  doing  open  price  v/ork. 

These  are,  (1)  the  Nest  Coast  lumbermen’s  Association  (nanufacturers 
of  Douglas  fir  lumber)  ; (S)  TTestem  Pine  I.hnufacturers’  Association  (manufactu- 


3ee  Chapter  1,  "Prevalenca  of  Open  Price  Associations",  p.  3. 

2. 

American  lur'csrcan,  June  S,  1917,  p.  -iC. 


Tirn 


rers  of  wasterr*  wliite  and  yellow  Hortliem  Henilocl?-  and  Hardv/ood  manu- 

facturers’ Association  (Lianufact’orers  of  hemlock  and  hard  woods  in  V'isconsin 
and  -upner  Michigan) ; (4)  ?/lchigan  HardTOod  Itoj-facturers’  Association  (manufac- 
turers of  hemlock  and  hard  woods  in  the  lower  peninsula  of  Michigan) ; (6)  North- 
ern Pine  L!^ufact'!U*ers’  Association  (manufactvirers  of  Minnesota  northern  pine) ; 

(6)  North  Carolina  Pine  Association  (manufacturers  of  North  Carolina  pine); 

(7)  Georgia- Florida  Saw  Mill  Association  (manufacturers  of  short  leaf  yellow 

pine  lum'oer) ; (8)  Southern  Cypress  Association  (man^ufacturers  of  cypress  lumoer) ; 

(G)  California  Sugar  and  YJhite  Pine  Manufacturers'  Association  (rrian-ofactvrers 

of  sugar  and  v/hite  pine  luiiiber) ; (10)  Southern  Pine  Association  (manufacturers 

1. 

of  yellow  pine  lumber) . 

The  only  important  association  of  manufacturers  doing  ouen  -^Tice  v;ork 
that  is  not  affiliated  vdth  the  national  organization  is  the  Aimerican  'HardwDod 
Manufacturers’  Association. 

The  sole  connection  that  the  national  association  has  had  vdth  the 
open  price  system  lias  been  to  receive  statistics  of  various  kinds  from  the 
regional  associations,  TJarticularly  those  of  production,  these  oeing  sumn'arized 

and  the  s-ommaries  distributed  to  the  lumber  manufacturers  throu^  the  regional 

2. 

associations.  The  Am^erican  Eardwood  Manufacturers’  Association  offers  the 
only  instance  where  an  association  has  been  organized  to  do  open  price  work. 

The  other  lumber  associations  1-ave  installed  the  work  as  a departmental  activity. 

ITo  doubt  the  followers  of  Mr.  Eddy  would  assert,  and  with  xcuch  trutn, 
that  the  lumber  associations  ai*e  not  true  to  the  standard  tjrpe  of  open  x^fic® 
association,  because  most  of  them  have  attenm>ted  to  To  more  than  merely  inform 
members  about  p<ast  transactions.  By  issidng  lists  and  discount  sheets 

_ 

■Preliminary  Report  of  the  Federal  Trade  Commission  on  Activities  of  Lumber 
Manufacturers’  Associations,  Jan.  10,  1921,  p.  3. 

Ibid.,  p.  3. 


130 


they  have  tried  to  indtice  n-^cibers  to  adopt  a 'jinifonr  or  rising  scale  of  prices. 

Practically  every  iTjriber  association  has  resorted  to  this  illegsil  practice  at 

one  tiine  or  another.  The  recent  report  of  the  Federal  Trade  Cointiission  shows 

that  there  has  "been  more  or  less  concerted  action  among  morabers,  v^rkinr  t hrousrh 

_ 1. 

coiMmittess,  in  IseD-ins  price  lists  a:ii  discount  sh.eets. 

On  June  18,  ISIS,  Ih’,  Ho’Arard  Ja;rne,  of  the  \Tlllappi  Lrriber  Company,  a 
meniher  of  the  Coraxiittee  on  Values,  v.Tote  Secretary  Babcock  of  the  ’Jest  Coast 
Luniberrcen’ s Association,  in  part:  ”'Jith  reference  to  the  ?/crk  of  the  Price 
Coixmittee  of  the  Association,  I an  afraid  ny  ideas  are  not  in  accord  v,dth  the 
Corcraittee,  in  that  I personally  feel  quite  opposed  to  coining  oun  with  so  many 
discount  sheets,  \7ith  such  radical  advances.  It  seems  to  me  the  rrarket  is  in  a 
shape  -where  it  is  profitable  to  all  parties  concerned  on  a basis  of  discount 
sheet  I'fo.  5,  and  that  from  that  point  on  it  sho-uld  be  a case  of  the  mills  aslcing 
a price  comensarate  with  their  ability  to  deliver  it.  Perhaps  it  is  tr:.e  that 
disco-unt  sheet  ho.  6 conforms  to  the  present  market  conditions,  in  fact  we  havo 

sold  items  on  that  basis;  nevertheless,  we  believe  concerted  action  on  the  part 

2. 

of  the  rdlls  sho-old  be  dropped  from  now  on.  ” 

According  to  the  version  of  the  Federal  Trade  Comnission,  sales  re- 
ports were  issued  to  enable  members  to  compare  the  act-ual  prices  obtained  vdth 

3. 

the  prices  quoted  in  tne  -uniform  disco-unt  sheets.  If  any  manufact'urer  inter- 
fered with  the  market  price  of  1-umber  by  q-uotlng  a Icvver  price,  he  was  immedi- 
ately notified  by  scr®  manu.fact-urer  of  the  disco-unt  sheet  in  effect,  together 

with  other  general  information  which  would  encounage  him  to  obtain  f-ull  list 

4. 

prices. 


1. 

I.o.  Prelimdrxary  Heport  of  the  Federal  Trade  Cemnission  on  Activities  of  L-um- 
ber  I/iairufacturers'  Associations. 

2. 

Ibid. , p.  66. 

I*  Ibid. , p.  68. 

’Ibid.,  p.  58. 


131 


In  1919  the  Ilchlgan  IIardv;ood  liamii’actnrerB'  Isscciation  snbiritted  the 
plan  of  iss-aing  price  lists  and  discovnt  sheets  to  !Ir.  L.  C.  Po;/le,  General  At- 
torney of  the  ITaticnal  Ltuiher  I.Iannfactr rers'  Association,  for  his  opinion.  V.V. 
?oyle  replied,  "As  a conservative  and  porecautioriary  iiiethod  I am  nrging  yonr 
i^rcup  to  abandon  your  price  list  plan.  ...  I Iccov;  that  it  is  not  the  purpose 
of  your  plan  to  fix  the  -price.  Your  menibers  are  free  to  sell  at  any  price  tney 
please,  nevertheless,  '.’hen  your  con'rdttee  publishes  a higher  price  than,  the  cur- 
rent market,  based  upon  its  conception  of  market  tendencies,  it  is  in  fact  -put- 
ting out  figT.-.res  tliat  are  at  least  to^e  snot  at  by  the  trade  and  to  that  ex- 
tent indirectly  doing  tlaat  \-vhich  tends  to  control  prices  to  a higher  level." 

It  r:.ay  be  remarked  that  as  a resiflt  of  this  opinion,  no  substantial  change  v.-as 

2. 

made  by  the  Michigan  Liinui’acturers  in  the  method  of  supplying  information. 

The  Federal  Trade  Coimissicn  gave  evidence  to  show  that  other  leading  associa- 

3. 

tions  vjere  puhsudng  similar  methods. 

Open  price  associations  organized  by  Mr.  Eddy  or  his  disciples  do  not 
perrrdt  "suggested"  price  lists  to  be  issued  by  the  central  office.  Any  price 
infonraticn  that  is  disseminated  must  be  based  on  prices  actually  ^uhted  by 
m'.emhers. 


1. 

Preliminary  Beport  of  the  Federal  Trade  Commission  on  A-ctivities  of  Lumber 
-ofacturers'  Associations,  pn.  80-Sl. 

2. 

Ibid.  p.  82. 

3. 

For  an  acccn.mt  of  the  price  activities  of  (1)  the  YJest  Coast  Lumbermen*  s Assoc- 
iation, see  Report,  pp.  57-S8;  (2)  the  YJsstem  Pine  Manu-facturers’  Associatlcn, 
pp.  59-74;  (.3)  the  Horthem  Hemlock'and  Eardwcod  I.hnufacturers*  Association, 
pp.  74-73;  (4)  the  Idchigan  Hardwood  Ihn-'ofacturers*  Association,  pp.  78-86; 

(5)  the  Southern  Pine  Association,  pp.  18-54;  (5)  the  C-eorgla-Florida  Saw  Mill 
Association,  p.  41. 


132 


'TIIS  Tt'LLOr  PUS  ASSOCIATION 


To  recount  the  crip;in,  history,  organization,  and  operation  of  each 

of  the  r.any  important  associations  of  lumber  imaniifacturers  '.vould  reqn.ire  a vol- 

1. 

'ime  in  itself.  Kov;ever  one  mo.st  needs  devote  son.e  attention  to  the  ea,rly 
history  of  the  Southern  Pine  Association,  knov.n  before  1914  as  the  Yellow  Pine 
Association,  because,  first,  an  iuportant  decision  Vinas  rendered  by  the  Supreme 
Court  of  the  State  of  Flssouri  with  reference  to  this  association,  and  this  de- 
cision has  a bearing  on  the  legal  aspects  of  open  price  work;  second,  the  ac- 
tivities  in  which  it  has  been  engaged  reflect  pretty  accurately  those  engaged 
in  by  manj^'  of  the  other  luirber  associations;  third,  it  is  one  of  the  oldest  as 
well  as  one  of  the  most  iir^jortant  of  the  luinber  associations  in  existence. 

The  Yellow  Pine  Association  first  h.ad  its  origin  among  certain  manu- 
facturers aid  wholesalers  in  Southern  territory  in  1990.  In  1906  membership 
was  limited  to  ^rellow  pine  rmsnufacturers  and  wholesale  dealers.  About  that 
time  the  membership  was  close  to  three  hundred  and  represented  a yellow  pine 
cut  of  nearly  four  billion  feet  out  of  a possible  nine  billion  feet.  It  was  a 
voluntary  organization,  hmid  a vTitten  constitution  and  b^'^lav/s,  board  of  direc- 
tors, president,  first  vice  president,  treasurer  and  secretary.  Their  duties 
were  those  which  ordinarily  go  with  their  respective  offices.  In  addition 
there  were  permanent  ccEmittees  on  "G-rades”,  "heights",  ’’Values",  ’’Good  of  the 

Association",  ’’Pe solutions’’,  ’’! 'embershlp’’,  aI^d  "Peverue",  ’’Auditing  of  Acccn.-'nt s}' 

3. 

"Terms  of  Sale",  an.d  "Price  List". 


1. 

An  account  of  their  earlier  history  rcay  be  fcimd  in  a Eeport  on  -the  Lumfoer 
Indtustry  by  the  Bureau  of  Corporations,  April  31,  1914,  Part  IV. 

iieport  of  the  Commissioner  of  the  cou.rt.  State  vs.  A_rkansas  Lurrber  Co.  et  al. , 
1S9  S.V.  , p.  154. 


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133 


The  o"bjects,  as  shov'/n  hi  the  section  of  the  constitr.tlcn  added  in  1905, 
\7ere  ”tc  secnre  a full  tinder  standing  cf  the  conditions  snrrovnding  the  Imaber 
Eoarhet  in  the  territory  covered  hy  this  association;  to  adopt  tmlform  grades  for 
the  inspection  of  Ittviber;  to  prorxte  -;;!nifor:n  customs  and  usages  among  manufactu- 
rers of  lumber;  to  procure  and  fitrnish  to  these  members  such  information  as  may 
tend  to  protect  them  against  unhusinesslike  methods  of  those  with  whom  they 
deal,  and  sv.ch  other  information  as  may  be  foroid  for  the  benefit  of  members;  and 
to  propose  and  carry  out  st'Ch  other  measures  as  tiaj'’  be  deemed  for  the  welfare 

and  in  the  interest  of  manufacturers  of  lumber  who  shall  bo  members  of  the  assoc- 

1. 

iation. ” 

This  association  v/as  one  of  the  r^ioneers  in  classifying  lumber  into 
uniform  grades  and  sizes.  By  a system  of  rigid  inspection  the  association  was 
able  to  enforce  aroong  iuanufacturers  of  yellow  pine  its  rules  pertaining  to 
grades,  sizes  and  veights.  bhat  is  more  important  f rom  t he  point  of  view  of 
open  price  ’.TOrk  is  that  these  inspectors,  employed  hj  the  association,  kept  the 
central  office  infonned  as  to  the  actual  arrouiit  of  yellow  pine  in  stock  among 
miembers.  In  addition  each  of  the  members  furnished  the  central  office  vdth  re- 
ports of  stock,  lumber  manufactured  axxd  shipments  made.  Thus  the  secretary 
knev/  the  amount  of  lumber  being  manufactured,  by  v.'hom,  the  amount  being  sold, 
by  whom,  and  the  amount  of  stock  remaining  in  the  hands  of  each  respective  mam^“ 

facturer.  This  information  was  disseminated  from  time  to  time  among  the  member- 

2. 

ship  by  mail  or  at  meetings. 

The  feature  of  the  association’ s- work  which  probablj’-  is  of  most  inter- 
est to  the  student  of  open  price  system.s  is  its  price  activity.  Here  is  found 

Eeport  of  the  Conmlssioner  of  t he  Coairt,  State  vs.  Arkansas  Lumber  Co.  et  al., 
15S  S.W. , p.  152. 

o 

Ibid.  xj.  154. 


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134 


wliat  is  vrido-ubtedly,  aaaon^  I'uxnbcr  associations,  tbe  earliest  instance  of  the  is- 

snance  of  orice  lists.  From  its  organization  in  1890  the  association  issued 

1. 

price  lists  to  menibers,  and  to  the  trade.  They  were  published  in  hoohlet  forr. 
to  1905,  and  subsequently  as  a narket  report.  The  work  of  preparing  the  list  was 
done  oy  a coirrdttee  until  1906,  when  it  was  turned  over  to  the  secretary.  In 
order  to  aid  him  in  getting  out  the  pice  list,  members  were  requested  to  submit, 
occasion.ally,  reports  of  sales.  Another  puitpose  in  calling  for  these  rep.or-cs 
was  to  determine  if  members  were  observing  the  association  price  list.  The_pro- 
cedure  followed  was  for  the  secretary  to  mail  to  each  member  a sheet,  v/hich  was 
a copy  of  the  price  list  in  force,  v/ith  a blank  column  at  the  right  of  the  column 
of  prices  quoted.  The  correspondent  in  ansu/ering,  if  selling  or  offering  at  the 
figures  contained  in  the  Tjrice  list,  would  malts  no  change  upon  the  sheet.  If 
there  were  items  which  he  had  sold  that  v;ere  lower  than  the  list,  he  would  insert 

the  prices  at  which  he  Itad  sold  or  was  offering  in  the  space  in  the  blank  column 

2 • 

opposite  the  item;  if  higher  tlian  the  price  list,  the  san'O  method  was  en^jloyed. 

^ith  this  information  as  a basis,  the  secretary  would  issue  his  price  list  or 

^ • 

discount  sheet.  The  new  prices  na::.ed  were  us^^ally  ’'boosting"  prices.  V/itnesses 

for  the  State  testified  that  v.lth  the  iss'jance  of  a carket  reuort,  the  dealers 

4. 

had  to  pay  the  prices  named  therein.  However  members  of  the  association  did 
not  all  abide  by  the  prices  listed.  Those  who  were  not  financially  strong  felt 
impelled  to  move  their  stocks  quickly  by  cutting  below  the  list  in  order  to  get 
ready  cash  with  which  to  meet  obligations. 


1. 

American  Lumberman,  June  22,  1912. 

2. 

report  of  the  Coirmissicner  of  the  Court,  State  vs.  Arkansas  Lumber  Co.  et  al., 
159  S.W.  p.  156;  also  American  Lumberman,  J'one  20,  1912. 

3. 

Heport  of  the  Commissioner  of  the  Court,  159. 

4. 

Ibid.  p.  159. 


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135 


1 


The'jaart  fo'jiid  uienibers  of  the  Yellow  Pine  Association  guilt/  not  only  of 

fixing  prices  to  he  charged  for  yellow  pine  luiuoer,  but  it  fouTid  theca  guilty  of 

1. 

the  curtailuient  of  output  by  agreement  and  concerted  action.  The  reports  of 

urod’oct ion,  sliipments,  and  stocks  were  a ready  instraiiaent  witn  wnicn  to  conscrt” 

na.te  this  conspiracy  to  curtail  production.  Concerted  action  v/as  secured  at 

meetings.  In  1904  a resolution  was  passed  to  the  effect  that  each  member  sho^Lld 

curtail  his  output  thirty- three  arid  one  third  per  cent  for  a period  of  ninety 

2 . 

days.  A large  ncmber  acted  in  accor'dance  vhth  che  resalution.  The  -monthly  re- 
ports of  cut,  shipmecits,  and  stocks  received  by  the  secretary  were  used  as  a 
check  in  detenrlning  how  well  members  wore  co'nplying  with  the  resolution.  After 

the  first  period  liad  elapsed,  a second  period  of  curtailmant  of  ninety  days  was 

2. 

recommended  with  like  res-'ults. 

A3  late  as  1912,  three  or  four  years  after  suit  load  beeai  brought 
against  members  of  the  lellov/  Pine  Association,  they  continued  to  exhort  each 
other  to  cut  down  production  and  'ooost  prices.  The  cnaracter  of  these  so-called 
"experience”  meetings  is  prett'cy  clearly  shoviin  by  the  f ollowing  extracts  from 
their  round  robin  discrussiont 

"Thirds  are  looking  fine  for  a good  year*  a business  if  we  do  not  get 
in  a hurry  for  crar  golden  eggs  and  kill  the  goose  crnrselves.  I cai"^  say  as  a 
general  rule  for  iiy  Tsjcas  brethren  in  the  Itimber  business  tl.at  t hey  are  not  tak- 
ing that  step,  fbr  the  last  60  days  I have  interviewed  every  travelling  roan  in 
the  -machi-nery  and  supply  lines  and  every  luifcermai'i  coming  into  the  office,  and 


1. 


3. 


Suit  was  beg^jn  in  1908;  final  judgment  was  rendered  in  1914. 

Beport  of  the  Commissioner  of  the  Court,  State  vs.  Arl-cansas  Lumber  Co.  et  al. , 
169  S.T/.  p.  150. 

Ibid.  p.  ISO. 


( 


t 


i 


136 


up  to  tlie  prasout  tii.ie  I ha.vo  not  found  tX  single  instanca  of  anyoody  increasing 

bis  prodaction.  If  that  policy  is  followed  I look  for  a better  year  than  even 

1. 

that  famous  year  1907. 

l!hr>  F.  G-.  Dickimn  said,  "Mq  closed  orders  day  before  yesterday  for  ex- 
port which  v’dll  run  us  to  Septeirber  aaid  we  are  not  going  to  nm  nights  or  over- 

2. 

time  to  miake  tl^at  up.  " 

i.Ir.  S.  K.  Fullerton  said,  ’’Lly  experience  is  much  the  saiiiO  as  others 
who  'nave  ^ooken,  I think  the  tide  has  set  onward  and  upv;ard  and  that  prices  of 
lumber  will  steadily  advance.  . . . After  hearing  the  talks  here  I thinuc  I will 
go  home  ana  get  ovtX  sales  manager  to  put  up  prices  about  $1.00  a thousand.  I 
do  not  seevhat  is  tiis  use  of  realizing  that  this  situa.tion  is  on  us  unless  we 
caii  take  some  advantage  of  it.  I see  my  friend  Johnson  sitting  here  and  I ex- 
pect he  will  put  his  urice  about  $1.50  in  order  tjo  save  some  of  it  for  a 

3.^ 

'nigher  xorice  later. 

In  handing  dov.'ii  his  decision,  the  judge  draw  a line  ox  distinction  ce- 
tween  proper  ai.d  im'^roper  price  activities  and  incidenta3.1y  passeu  judgmei.u  in 
favor  of  open  price  activity  as  conceived  'oy  Oxt.  Eddy  and  his  followers.  This 
is  the  only  r*ullng  tliat  iias  yet  'oeen  made  'oy  any  Sj,ate  court  oearing  directly 
on  the  legality  of  exchax.ging  infonriation  about  past  tra-isactioiis. 

In  giving  his  opinion  he  said  in  part,  " A price  current  may  be  issue 
under  t'ne  lllssouri  Aiiti-trust  laws,  but  the  list  or  comm-ilation  ought  either  to 
be  comiplled  and  promulgated  by  an  indifferent  or  wholly  disinterested  person, 
or  if  corfaplled  and  promlgated  by  an  interested  person,  it  ought  to  be  honestly 
and  fairly  compiled;  it  ou^ht  fairly  wO  represent  current  pi’icas  as  'cased  upon 

1 

J-  • _ 

^eech  of  Ell  Wiener  at  r*<ont'nly  meeting  of  Yellow  Pine  Association,  quoted  in 
American  Lumbenian,  July  6,  191''-',  p.  41. 

2. 

Ibid.  p.  41. 

3. 

Ibid.  p.  42. 


137 


act'oal  saiea,  or  upon  activuil  offers  to  soil,  and  not  ndsropresent  sucli  prices 
with  a viow  of  doc  sting  any  prices  of  any  itea  or  iteius. 

”If  Sciith,  the  secretary  of  'the  association,  pursuing  the  lawful 
methods  originated  oy  him  of  ootaining  reports  .from  correspondents  of  actml 
sales,  load  fairly  compiled  and  averaged  ffuch  reports  into  a list  of  current 

prices  of  yellow  pine  lumber,  we  would  not  say  tliat  Smitn^  s acts  or  acts  ox 

1. 

the  association  in  this  behalf  were  unlawf'al." 

The  judge  inposed  meavy  fines  on  many  of  the  Isadixig  maiaulacturers. 
The  Yellow  Pine  Association  was  disbanded,  only  to  be  imsdiately  reorganized, 
with  t he  help  of  I/ir.  Eddy,  under  tl^e  nam  of  the  Southern  Pino  Association.  Of 
the  open  price  associations  t* *iat  have  been  mentioned  this  association  is  tie 
largest  in  point  of  membership  with  the  exception  of  the  Americas.!  Eardvxs-od 
ran'ofcxCturors’  Association,  lliere  were  approxinutcly  two  imtidred  uiem'oers  ixi 
1918.  Since  the  scops  of  its  activities  is  very  similar  to  tla,t  of  the  Ameri- 
can hardwood  l.jaxrafacturers*  Association,  wtiose  activities  are  to  be  revie'wed 

2. 

later  ixa  this  chapter,  this  subject  v/ill  be  omitted. 

The  history  of  the  Yellow  Pine  Association  illustrates  with  wlxat- 
readiness  the  open  price  system  my  be  made  a tool  in  the  hands  of  those  who 
'.vould  pervert  its  use  in  order  to  acco2r:lish  results  at  once  unlay/ful  and  ixi- 
jurious  to  the  public. 

Tl-rs  AI.EPJCAY  IhirODYOOD  IIAYUFACTUKERS'  asscciatioit 


Tlie  American  Hardwood  Tjaxuifa^turers’  As ..^o elation,  before  it  recently 

o« 

ceased  doing  open  price  v;ork,  v/aa  the  largest  open  price  association  in  ex- 


■Oplnion  of  the  judge.  State  vs.  Arkansas  Luunber  Co.  et  al.,  1S£  S.YJ.  p.  177. 

O 

• 

A review  of  its  activities  my  be  found  iii  the  American  Lumberman,  mrch  26, 

• Oo  t 

3. 

In  Iviarch,  1920,  this  Federal  Court  for  the  \Ysstem  Li  strict  of  Tennessee  grant 

ed  an  inj-unctior.  restraining  members  from  engagin>?  in  open  price  activity. 

See  c-xiaoter  I.  nn.  4-5.  ^ 


138 


intense.  Earljr  irx  1920  its  riieirbersldLp  corcpriued  3o3  liaxvafactv.rei’s,  who  o^.oratQd 
approxinately  455  oat  of  aii  a_.-proxi:oax;e  total  of  9,624  udlls  engaged  in  i*ardv;ood 

uanafact'.'-.re  in  the  United  States,  and  cacir  oatpat  was  aboat  thirty-three  a;id 

1. 

one  third  per  cent  of  "Dhe  total  prodaction  in  the  United  States. 

This  association  came  into  existence  Janiiary  1,  1919,  as  a result  of 
the  an'a,lga.ration  of  bu^o  associations  of  hiardv/ood  cianafactarers,  the  Hardwood 
L^iafactarers’  Association  of  the  United  States,  with  headquarters  in  Clnclrciati, 
organised  in  1902,  which  orev;  its  membership  in  the  rtaln  from  the  eastern  part  of 
the  United  States;  and  the  Ane  dean  Hardwood  Llanafactarers’  Association,  with 
headquarters  at’  Ivhmphis,  organized  in  1917,  as  a consolidation  of  two  smaller 
groups,  which  drew'  its  i;*6inbership  almost  entirely  frcmi  the  southern  part  of  tihe 
United  States.  The  f.vo  smaller  groups  were  the  Qira  Lumber  Lianufact'orers’  Associ- 
ation, orgaixizsd  in.  1914,  and  uhe  American  Oax  I.^ufaCb'Ui’ers’  Association,  orga..!- 
ized  in  1916.  Each  of  these  swa-l pt'oups  did  open  price  Vvork  from  dicir  inception. 
The  open  j-.rice  plan  opei’ated  by  the  American.  liardwood  idmcfaciurers’  Association 
since  Jai-uary  1,  1919,  was  that  adopted  by  the  American  HardiTOod  liinui’acturers’ 

/-r 

w t 

Associatioi*  of  die  United  States,  I, Arch  1,  1917.  Tlie  reason  for  the  amaigmA- 
tion  was  tlAt  these  uvo  groups,  to  wit,  the  hard,700d  Liaiiufacturera’  Association  of 
the  United  States  and  the  Aicerican  Hardwood  lAnuiac v'urers’  Association,  had  an 
inberudngled  membership,  a.id  were  doing  more  or  less  the  same  cixaracter  or  work. 

It  was  thought  t’-iat  by  avoiding  duplication  of  .vork  much  expense  could  be  saved 

JL 

the  njecHoers. 


ihaerican  Luu.be rmian,  larch  15,  1920. 

An  account  of  t lie  open  price  work  done  by  the  Gum  lumber  lanufacVurers’  Associ- 
ation may  be  found  in  the  American  Luxaberman,  lay  23,  1914.  For  accounws  of  the 
organization  a.xd  operation  of  the  America-i  Oax  lanufacturers’  Association,  sec 
Auarica:'.  L-umbeiuaii,  iTov.  14,  1915  and  Jan.  27,  1917. 

Siark,  II. V/.,  liecord,  AL.erican  Col.  and  Lumber  'Co.  vs.  U.  S.  Vol.  2,  p.  1249. 


C-add,  F.  H. , las  cord,  Vol 


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139 


The  objects  and  puipoaes  of  the  American  Hardwood  ^feui-ufacturers'  Assoo- 
lation,  as  expressed  in  its  constitution,  are  ” to  secure  a full  understanding  of 
conditions  surrounding  the  Hardwood  Industry;  to  adopt  such  measures  as  will  pro- 
vide for  uniform  standards  and  improved  methods  of  manufacturing  and  marketing 
Hardwood  Forest  Products;  to  acquire,  preserve  and  disseminate  information  in  con- 
nection therewith;  and  to  generally  promote  the  interests  and  welfare  of  Hardwood 
1. 

manufacturers. 

Membership  is  limited  to  manufacturers  of  hardwood  forest  piroducts. 

Each  member  is  entitled  to  one  vote,  and  this  vote  must  be  cast  in  person  or  by 
an  authorized  representative  of  the  firm;  proxies  are  not  permitted.  A majority 
vote  of  the  Board  of  Directors  is  sufficient  to  elect  an  applicant  to  membership. 
The  Board  of  Directors  has  the  power  to  expel  any  member  for  cause,  by  a majority 
vote. 

I^on  being  elected  into  membership,  members  must  pay  an  initiation  fee 
of  $26.00.  Dues  are  gradmted  according  to  the  volume  of  production  The  rate 
of  dues  are  fixed  by  the  Board  of  Directors  and  are  assessed  annually  by  a Com- 
mittee on  Assessments.  They  are  payable  in  monthly  installments,  and  any  member 

failing  to  pay  any  Installment  within  thirty  days  after  it  is  due,  is  subject  to 

2. 

suspension. 

The  officers  of  the  association  consist  of  the  President,  First  and 
Second  Vice-presidents,  Treasurer,  Secretary-Ivlanager  and  twenty^one  trustees. 

The  President,  Vice-Presidents  and  Treasurer  are  elected  annually  by  the  member- 
ship; the  trustees,  every  third  year.  The  Secretary- Manager  is  appointed  and  has 
his  salary  fixed  by  the  Board  of  Directors.  The  latter  consist  of  the  elective 
officers  and  trustees.  The  Executive  Committee  is  made  up  of  the  President  and 
six  of  the  directors.  The  latter  are  appointed  by  the  President  at  the  annual 


1. 

Constitution, 

Art.  2, 

Becord, 

Vol.  2,  p.  1293. 

2. 

Constitution, 

Art.  3, 

Be  cord, 

Vol.  2,  p.  1293. 

r-.'S' 


•X  . c . . 


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140 


meeting,  and  serve  one  year,  their  appointments  being  s ubject  to^ie  approval  of 

the  Board  of  Directors.  The  duties  of  officers  and  directors  are  those  which  or- 

1. 

dinarily  go  with  their  offices. 

In  addition  to  t hese  officers  and  directors  there  are  a number  of 
standing  committees  appointed  annually  by  the  president,  subject  to  ratification 
by  the  members.  The  scope  of  the  activities  of  the  association  is  pretty  well 
indicated  in  noting  the  scope  of  the  activities  of  these  permanent  committees. 

The  Committee  on  J&mbership  takes  such  steps  as  are  necessary  to  in- 
crease the  membership  of  the  Association,  and  passes  upon  the  eligibility  of 
those  making  application  for  membership.  The  Committee  on  Assessments  assesses 
the  annual  dues.  The  Committee  on  Advertising  passes  upon  and  handles  the  ad- 
vertising programs  of  the  Association.  The  Committee  on  Finance  audits  the 
books  of  the  Association  and  supervises  financial  matters  in  general.  The  Com- 
mittee on  Bssolutions  handles  matters  which  would  properly  cane  before  such  a 
coinaittee.  The  Corrmittee  on  Reports  and  Statistics  works  out  plans  for  securing 
and  tabulating  such  information  and  statistics  as  will  be  of  value  to  the  meitt- 
bership.  The  Committee  on  Inspection  Rules  deals  with  all  matters  pertaining  to 
inspection  and  grading.  Then  there  is  a committee  representing  the  interests  of 
each  wood,  which  undertakes  to  promote  and  take  charge  of  such  scientific  and 
conmercial  investigations  as  will  inure  to  the  benefit  of  the  manufacturers  of 
that  wood.  These  woods  are  gum,  oak,  poplar,  ash  and  hackberry,  cottonwood, 
chestnut,  elm  and  maple,  cypress,  hickory  and  pecan,  walnut,  and  sycamore. 

There  is  another  committee  which  exists  to  promote  the  interests  of  manufacturers 

of  sawn  and  sliced  veneers,  and  another  for  manufacturers  of  commercial  rotary 

2. 

veneers. 


1. 

Constitution,  Art.  8,  Record,  Vol.  2,  p.  1297. 

2. 

By-laws,  Art.  2,  Record,  Vol.  2,  pp.  1300-1301. 


■ • ■'  •t'-'v'"-'  i‘  'J  i ■-&/:;*  I '’•  S' j.  7/,:.  '.’  /'V  j &vj;-5  , -,a .!  ’ .. 

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141 


Arinml  and  monthly  meetings  are  held,  and  special  meetings  may  he  called 

oy  the  President  or  hy  a majority  of  the  Board  of  Directors.  At  the  annual  meet- 

1. 

ings  officers  are  elected  for  the  ensuing  year.  In  addition  it  is  customary 
for  the  president  to  review  in  a general  way,  and  the  secretary  more  in  detail, 
the  work  accon^plished  hy  the  association  during  the  year.  The  monthly  meetings 
have  been  held  hy  groups  in  the  various  regions  of  production.  These  group  meet- 
ings have  been  held  at  Cincinnati,  Ohio;  Menphis,  Tennessee;  New  Orleans,  Louisi- 
ana; and  Little  Bock,  Arkansas.  They  have  been  held  at  ■^ese  points  as  a con- 
venience to  the  members  in  attending.  In  order  to  have  the  discussion  at  these 
meetings  proceed  in  an  orderly  and  systematic  manner,  the  Manager  of  Statistics 
was  in  the  habit  of  mailing  to  each  member,  a few  days  in  advance  of  t he  date  of 

the  meeting,  a questionnaire  containing  a request  for  information  bearing  on 

2. 

market  conditions  as  related  to  the  hardwood  industry.  In  the  light  of  the  re- 
plies received  to  the  questions,  members  present  at  meetings  would  discuss  the 
various  subjects  developed  by  the  answers.  The  minutes  disclose  that  these  dis- 
cussions were  free  and  open.  Outsiders,  including  corqpetitors  and  buyers,  freely 

3. 

participated  in  them.  At  practically  every  group  meeting  manufacturers  and 

other  people  not  members  of  the  Open  Conroetition  Plan  were  present. 

% 

If  one  were  to  make  a summary  of  the  chief  points  tliat  usually  came  up 

for  discussion  in  these  meetings,  perhaps  the  following  would  be  representative: 

1.  The  class  of  customers  from  which  most  inquiries  and  orders  wore 

coming.  Answers  to  this  question  showed  what  industries,  consuming  hardwoods, 

were  most  active,  and  served  to  guide  members  in  determining  on  \idiat  kinds  of 

lumber  to  accentuate  and  diminish  production. 

2.  The  length  of  time  that  it  would  take  members  to  ship  out  total 

orders  on  hand,  working  under  normal  conditions.  The  answer  to  this  question 
_ 

Constitution,  Art.  6,  Record,  Vol.  2,  p.  1296. 

2. 

^^Gadd,  F.R. , Record,  Vol.  2,  p.  1101. 

Gadd,  F.  R. . Record.  Vol.  2^  -i^.I104. 


142 


obviously  disclosed  the  amount  of  unfilled  orders  on  hand,  indicating  whether  hus- 
iness  was  good  or  not. 

3.  Tl^ie  total  production  of  hardwoods  for  the  past  month.  These  data 
when  compared  to  normal  production  showed  whether  or  not  there  was  a tendency  to 
accelerate  or  slow  down  production.  When  considered  in  relation  to  the  size  of 
stocks  on  hand  and  volume  of  orders,  it  was  possible  to  discern  rou^ly  whether 
the  tendency  was  in  the  direction  of  overproduction  or  underproduction. 

4.  The  total  present  stock  of  hardwoods,  sold  and  unsold.  These  data 
wl^n  conpared  to  t he  normal  stocks  on  hand,  and  taken  in  relation  to  the  volume 
of  production  and  orders,  were  criteria  of  t he  probable  future  trend  of  prices, 
and  also  served  to  guide  members  in  formulating  their  production  policy. 

5.  The  condition  of  labor  as  conpared  to  thirty  days  ago  aiid  the  causes 

for  any  changes  that  mi^t  have  come  about.  The  efficiency  and  availability  of 
labor,  of  course,  had  a direct  bearing  on  the  quantity  and  quality  of  production. 

6.  The  character  of  the  car  supply  as  compared  to  thirty  days  ago. 

The  answer  to  this  question  obviously  revealed  with  what  dispatch  shipments  were 
going  forward  to  customers. 

7.  The  character  of  collections  as  conroared  to  thirty  days  ago.  These 
data  revealed  the  financial  conditions  prevailing  among  customers  in  the  consum- 
ing Industries,  and  reflected  to  some  extent  the  general  financial  condition  of 
the  country. 

8.  The  number  of  mills,  if  any,  expecting  to  shut  down;  the  length  of 

time  they  were  to  remain  shut  down  and  the  reasons  therefore.  The  answer  to  this 

1. 

question  revealed  to  a degree  the  future  trend  of  production. 

The  reporting  plan,  as  inaugurated  by  the  Hardwood  IvJanufaoturers’  Asso- 
ciation of  the  United  States  in  1917,  and  taken  over  by  the  American  Hardwood 
Ivlanufacturers’  Association  In  1919,  provided  for,  first,  production  reports; 


1,  pp.  104-223;  also  Gadd, 


F, 


R. 


f 


Record, 


143 


second,  sales  reports;  third,  shipping  reoorts;  fourth,  stock  reports;  fifth 

1. 

price  lists;  sixth.  Inspection  reports. 

Reports  of  production  were  to  have  "been  made  to  the  secretary,  month- 
ly, each  wood  being  classified  according  to  grades  and  thicknesses,  and  the 
secretary  was  to  have  sent  to  each  member,  once  a month,  a somrrary  of  the  pro- 
duction for  the  previous  month,  but  this  feature  of  the  plan  had  to  be  abandoned 

because  a siifficient  number  of  mills  did  not  turn  in  reports  to  make  the  infor- 

2. 

mation  complete  enough  to  be  representative. 

The  sales  report,  as  originally  planned,  was  retained,  with  the  excep- 
S'  f©w  minor  changes.  Members  were  required  to  make  a daily  report  of 
all  sales  and  cancellations,  and  these  were  to  be  exact  copies  of  orders  taken 
and  were  to  include  all  agreements.  These  reports  were  conralled  and  issued  to 
members  weekly,  in  printed  form.  The  plan,  as  it  originally  stood,  Involved 
publishing  the  names  of  customers,  but  this  was  discontinued  as  it  was  found 
that  some  of  the  members  objected  to  publishing  the  names  of  their  customers. 

The  sales  report  mailed  to  members,  as  finally  evolved,  showed  for  each  kind 
of  wood  and  grade  the  date  of  sale,  by  whom  sold,  the  number  of  feet  sold,  the 
thickness,  the  destination  by  city  or  territory,  the  delivered  price  made  to 
the  customer,  its  equivalence  at  a common  gateway,  such  as  Cairo  or  Cincinnati, 
and  the  current  average  of  sales  at  these  gateways.  The  puipose  of  the  gateway 
price  was  to  put  all  prices  on  a common  basis  for  coc^arison.  Comparison  of 
the  actual  prices  received  was  not  possible  because  of  difference  in  freight 

rates  to  different  points.  "ProJecUon  of  prices  to  their  gateway  equivalent" 

3. 

put  all  prices  on  a common  basis,  thus  making  them  cong)arabl0. 


1. 


2. 


3. 


Gadd,F.  R.,  Exhibit  12,  Record,  Vol.  1,  p.  82. 
Gadd,E.R.,  Record,  Vol.  2,  p.  1107. 

See  cop.y  of  sales  report,  Apaendix,  Exhibit  21. 


ir'v,  Aal- 


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144 


Having  members  mal^e  reports  of  shipments  was  a phase  of  the  plan  that 
was  never  put  In  operation.  It  was  found  Inpractl cable  to  do  so.  These  reports 
were  to  have  been  made  dally  by  members,  and  were  to  have  been  exact  copies  of 
the  Invoice.  They  were  to  have  been  summarized  by  the  secretary,  much  In  the 
same  way  that  reports  of  sales  were  summarized,  and  mailed  weekly  to  members. 

Eeports  of  stocks  were  made  monthly  to  the  secretary,  showing  the 
amount  of  stock  In  each  grade,  kind,  and  thickness  on  hand  the  first  of  the 
month.  Three  columns  were  provided.  The  first  two  columns  showed  the  total 
stock  on  hand  both  sold  and  unsold  divided  into  green  and  dry.  The  third  column 
showed  the  total  stock  of  each  kind,  grade,  and  thickness  sold.  The  secretary 
cos^iled  all  reports  into  one  report,  showing  for  each  grade,  kind,  and  thick- 
ness, in  separate  columns,  total  dry  stocks,  total  green  stocks,  stocks  sold, 

stocks  oversold,  stocks  unsold,  stocks  unsold  for  the  month  previous,  and  the 

2. 

increase  or  decrease  in  stocks  unsold. 

Price  lists  were  to  have  been  filed  by  each  member  with  the  secretary 
at  the  beginning  of  each  month,  and  any  changes  of  prices  were  to  have  been 
filed  as  soon  as  made.  The  secretary  was  to  have  sent  out  each  month  a summary 
of  these  price  lists  showing  the  prices  asked  by  each  member,  and  any  changes 
reported  by  members  were  to  have  been  immediately  transmitted  by  the  secretary 
to  all  members.  However,  this  phase  of  the  plan  was  discontinued  because  many 

members  did  not  publish  price  lists  regularly,  and  the  information  was  not  suf- 

3. 

flclently  conrolete  to  be  representative. 

Inspection  reports  were  submitted,  to  the  secretary  by  inspectors  who 
were  einployed  to  check  up  on  the  grading  of  members.  This  report  to  the  secre- 

1. 

Gadd,  F.  R. , Record,  Vol.  2,  p.  1107. 

2. 

See  copy  of  stock  report.  Appendix,  Exhibit  31., 

3* 

Gadd,F.R.,  Record,  Vol.  2,  p.  1107. 


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145 


tary  showed  the  grading  of  the  various  mills  and  also  the  association  inspector': 
grading  on  the  same  shipments.  It  was  relayed  by  the  secretary  to  all  members. 
The  purpose,  as  e^ressed  by  the  organizers  of  this  plan,  was  not  to  change  any 
member's  grading,  but  to  furnish  each  member  with  a "basis  upon  vjhlch  ho  can 
conroare  his  prices  with  those  of  other  members,  thereby  making  the  price  reports 
more  intelligible  and  accurate.  " 

The  remaining  feature  of  the  plan  was  a market  report  letter  vdiich  was 
to  have  been  issued  monthly  by  the  Committee  on  Beports  and  Statistics.  The  in- 
tention was  to  have  the  committee  give  its  idea  of  the  market  and  to  incoroorate 

2. 

a general  analysis  of  market  conditions.  However,  the  work  of  getting  out 
this  market  letter  was  turned  over  to  the  secretary.  He  did  not  mail  out  the 
letters  monthly  as  was  provided  for  by  the  original  plan,  but  issued  them  at 
irregular  Intervals.  They  were  written  on  a groat  many  different  subjects  bear- 
ing on  matters  of  business  interest,  but  in  the  main  they  were  an  expression  of 
the  secretary's  understanding  of  industrial  conditions  as  related  particularly 
to  the  hardwood  industry. 

These  letters  seem  to  have  been  the  chief  cause  of  t he  action  of  the 

« - - 3. 

Government  in  filing  suit  against  the  members  of  the  Association.  The  conten- 
tion of  the  Government  was  that  they  were  written  with  the  purpose  of  inciting 
members  to  "boost"  prices,  and  that  a conspiracy  existed  among  members  to  effect 
this  end.  The  writer,  having  read  them,  inclines  toward  the  point  of  view  that 
these  letters  did  little  more  than  point  out  the  actual  conditions  of  the  mar- 
ket. These  conditions  were  such  as  would  inevitably  have  led  to  rapidly  rising 

i.  “ 

^ Report  of  Open  Competition  Plan,  Record,  Vol.  1,  p.  86. 

Ibid.  p.  87. 

3. 

For  an  account  of  the  Hardwood  case,  see  chapter  8,  pp.  157-160. 


i 


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146 


prices,  irrespective  of  any  conspiracy  that  my  or  may  not  have  existed.  The 
follovd.ng  quotation  taken  from  the  report  on  the  lumber  industry,  made  June  1, 
1920,  by  the  Forest  Service  of  the  United  States  Department  of  Apiculture,  de- 
picts very  succinctly  conditions  as  they  prevailed  early  in  1919,  the  tine  that 
the  Government  alleges  the  conspiracy  began. 

”Tho  termination  of  the  war  foimd  the  lumber  industry  with  depleted 
stocks.  Production  during  the  war  had  been  much  less  than  normal  on  account  of 
shortages  of  labor  and  equipment  and  embargoes  on  transportation.  A large  part 
of  the  lumber  produced  had  been  taken  by  the  Government  for  war  purposes.  Daring 
the  same  time,  the  normal  construction  of  dwellings  and  industrial  structures  and 
the  use  of  lumber  in  many  manufacturing  industries  had  been  greatly  curtailed. 
Following  the  war  these  pent  up  demands  were  released.  They  caught  the  lumber 
industry  not  only  with  its  stocks  short  and  broken  from  war  conditions,  -but  unable 
on  account  of  labor  difficalties,  lack  of  freight  cars,  and  bad  weather  in  inpor- 
tant  producing  regions,  to  respond  rapidly  with  increased  production.  Aside  from 
the  general  causes  affecting  prices  of  most  conmodities,  the  ejq^ansion  of  credit 
acconpanied  by  cmrrency  inflation  and  the  wave  of  speculation  and  extravagance, 
an  "auction''  lumber  market  would  no  doubt  have  resulted  from  frenzied  conpetltion 
of  buyers  to  obtain  the  limited  stocks  available,  wholly  inadequate  to  satisfy 
current  demands. 

"Under  the  combined  influence  of  t he  general  conditions  making  for  high 
prices  and  this  situation  in  the  lumber  industry  itself,  prices  rose  to  uiprece- 
dented  limits,  in  March,  1920,  average  mill  prices  in  the  South  and  West  had  in- 
creased 300  percent  and  more,  over  the  prices  received  in  1914,  and  average  re- 
tail prices  in  the  Middle  ?Jest  showed  increases  ranging  from  150  to  200  percent. 

In  the  case  of  the  hl^  quality  hardwoods  and  other  specialized  products,  the 
average  advance  in  eastern  wholesale  markets  was  from  200  to  250  percent,  and  the 


T 


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iX;'  .jrf  ......  w,’’!  ^ »A-.f  '/f  .*ii  cp.'. .•.•»,  - ■ /; 'yji 


147 


_ 1. 

demand  at  this  advance  was  still  unsatisfied.  ” 

This  extract  is  written  from  the  point  of  view  of  the  whole  lumber  in- 
dustry, but  the  conditions  named  therein  were  peculiarly  applicable  to  the  hard- 
wood industry.  Several  hundred  pages  of  testimony  were  taken  in  the  Hardwood 
case,  gathered  not  only  from  members,  but  from  disinterested  non*-members  and 
buyers,  substantiating  the  point  of  view  that  conditions  of  supply  and  demand 
were  such  as  to  produce  a runaway  market.  Prices  rose  so  high  that  members  be- 
came alarmed  lest  they  should  react  unfavorably  on  the  hardwood  industry  by  caus- 
ing purchasers  to  resort  to  substitutes.  Some  of  the  leading  producers  attengpted 
for  a tine  to  stem  the  tide  of  rising  prices  by  refusing  to  raise  their  own,  but 
the  current  was  too  strong  for  them,  and  seeing  that  their  efforts  were  of  no 

avail,  they  resumed  the  policy  of  taking  the  price  that  market  conditions  made 

2. 

it  possible  to  secure.  Instances  are  given  where  buyers  offered  producers 

premiums  in  order  to  get  the  stocks  they  so  urgently  required.  They  bid  against 
- . 3. 

each  other  for  the  available  stocks.  If  there  was  a conspiracy  to  raise  prices, 
it  at  least  did  not  result  in  raising  the  prices  secured  by  members  to  a higher 
level  than  those  secured  by  non-members.  A comparison  of  the  prices  of  members 

and  non-members  discloses  this  fact,  as  does  the  testimony  of  several  buyers  who 

4. 

purchased  from  both  classes  of  producers.  The  conspiracy,  if  there  was  one, 
was  of  an  innocuous  kind.  In  the  face  of  the  facts  here  reviewed,  it  is  difficult 

T. 

Report  of  the  Forest  Service  of  the  U.  S.  Department  of  Agriculture,  Timber  De- 
pletion, Lumber  Prices,  Lumber  Exports,  and  Concentration  of  Timber  Ownershio 
June  1,  1920,  p.  34. 

2. 

Ritter,  W.H. , Exhibit,  Open  Letter  to  Hardwood  Marnf  acturers  and  their  Patrons. 
Record,  Vol.  2,  p.  1277. 

3. 

Minutes  of  meeting  held  at  Cincinnati,  Ohio,  June  10,  1919.  Record.  Yol.  1. 
Exhibit  No.  388. 

4. 

See  chart  No.  I,  Chapter  9;  see  also  Dulweber,  B.F.,  Record,  Vol.  3,  p.  1653; 
Bayer,  J. , Record,  Vol.  3,  p.  1617. 


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T**/  ^ , V 


148 


to  'understand  what  incen'ti'vc  there  cculd  have  hsen  for  prod'ucers  to  coni^lre  to 
raise  prices  when  b-uyers  were  willing  to  take  their  stocks  at  any  price,  almost, 
that  they  cared  to  designate,  even  at  times  offering  a higher  price  than  produ- 
cers were  quoting. 

From  the  standpoint  of  avoiding  prosecution  at  the  hands  of  the  Gov- 
ernment, at  least,  the  action  of  the  secre'tary  of  the  American  Hardwood  Itaufac- 
turers'  Association,  in  interpreting  statistics  to  members  in  such  a way  as  to 
elucidate  to  them  the  course  of  action  that  their  self  interest  should  lead  them 
to  take,  seems  indiscreet,  and  is  so  regarded  by  the  Eddy  association  secretaries. 
The  la'tter  appear  to  be  caref-ul  not  ■to  do  more  than  convey  information  bearing  on 
actual  transactions,  leaving  memberefree  to  come  to  an  Independent  decision  re- 
garding 'their  price  and  production  policy.  There  is  no  evidence  that  the  secre- 
tary attenpted  to  Influence  members  in  their  price  and  production  policy  in  any 
other  way  tlian  through  these  market  letters.  Neither  does  it  ^pear  that  this 
association  has  been  guilty  of  issuing  price  lists,  with  the  intent  of  bringing 
abou't  -uniformity  among  members  in  their  price  qucbations,  as  have  most  of  the 
other  1-umber  associations. 

The  failure  of  the  secretary  to  secure  all  the  data  from  members  con- 
tenplated  in  the  original  plan  illustrates  hov/  very  difficult  it  is  to  operate 
successfully  an  open  price  plan  where  the  association  membership  is  large  and 
scattered  over  a wide  area  of  territory. 

PUBLIC  AND  ECONOMIC  ASPECTS  OFTHE  LUlffiER  IIHUSTRY  IN  THEIR  RELATION  TO  TEE  OPEN 

PRICE  PLAN 

There  are  certain  serious  evils  at-tending  the  production  and  distribu- 
tion Of  lumber  which  exercise  a detrimental  effect  not  only  on  the  best  interests 
of  manufacturers  themselves,  but  also  on  tliose  of  the  public,  in  their  capacity 


^ , ' ■ ■ * •'■auF  |)i  ;i'X(iJ»A(f'C,* 

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. ■ ’ ' 


•'  Svi:}  - ili>n#v‘„-  .'  Irj,  ai/oi*;?o 

"■■'■  " '■  ' XA?^f«rlv;^afc  .«  *2-:.  iq  . 

a»'>'»w  ■ i-  o,i.t  ^0  tfoor./  no  oti^  .oOVlts^r.^v.  j ca-;.v*04ixx-. 


149 


of  cons-umers  of  limber.  The  aim  of  this  section  will  he  to  discuss,  first,  the 
character  of  these  detrimental  influences,  and  second,  such  remedies  as  seem 
applicable  to  the  situation,  giving  special  emphasis  to  the  role  that  the  open 
price  plan  can  play,  perhaps,  as  a remedial  measure. 

The  chief  evils  associated  with  the  lumber  industry  may  be  traced  back 
to  two  leading  sources.  One  finds  its  fountain  head  in  the  feverish  speculative 
activity  in  timber  lands  that  has  gone  on  in  the  past;  the  other  in  the  charac- 
ter of  the  industry  itself.  Disregarding  the  forces  tliat  have  led  to  this  snec- 
ulative  activity,  its  result  has  been  to  build  i;^)  an  e3a3essive  burden  of  timber 
investment.  Excessive  timber  investments  have  created  a need  for  meeting  cur- 
rent charge  3 the  re  on.  In  order  to  secure  the  funds  with  which  to  meet  these 
charges  investors  have  been  constrained  t o produce  as  much  lumber  for  t he  market 
as  possible,  with  the  result  that  the  lumber  industry  has  been  built  up  beyond 
its  needs.  This  close  alliance  with  timber  speculation,  has  made  lumber  manu- 
facture ”the  tail  of  the  dog,  existing  not  as  a business  in  itself,  conducted  on 

its  own  merits,  but  solely  as  a means  of  getting  rid  of  timber  vhen  speculative 

3 . 

interests  dictated.  ” Excess  mill  capacity,  taken  together  with  the  burden  of 
meeting  obligations  to  pay  interest  on  bond  issuesand  principal  on  maturing 
bonds  have  been  a pressure  forth©  steady  running  of  mills  which  has  led  to 
periodic  over  production. 

The  character  of  the  industry  itself,  by  giving  rise,  among  manufactu- 
rers, to  a. strong  spirit  of  individualism,  has  had  its  effect  on  the  production 
and  distribution  of  lumber.  The  nature  of  the  industry  has  been  such  as  to  iso- 
late manufacturers  from  one  another.  Sawmills  have  been  numerous  and  have  been 

T. 

Some  Puolicand  Economic  Aspects  of  the  Lumber  Industry,  Eepoirt  No.  114,  by 
the  Forest  Service  of  t he  Department  of  Agriculture,  issued^  Jan.  24,  1917, 

Gadd  E:)diibit  "A”,  Record,  Voi.  2,  p.  1177. 

2. 

Ibid.  p.  1181. 


lls 


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---  • ^ 


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C -6  ,.  to£fx  :c  .-  ji 


r...  ,.-:  i.,,-  !i^.t  t 

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■ -„■■■  •>■'  ■,.,  ..  ,.  ,■-  I 

- '■'  ■ ' • • J --  . li' 


150 


spread  over  a wide  area  of  territory  because  timber  is  spread  out  over  a wide 
area,  is  of  great  weight  and  low  value  and  can  therefore  not  be  shipped  long 
distances  to  be  manufactured. 

The  very  ^irit  of  self  reliance  and  independence  fostered  by  the 
rough,  physical  conditions  characteristic  of  the  lunber  industry  has  carried  with 
it  an  element  of  v/eakness  as  well  as  strength.  Not  beingwLlling  to  submerge  their 
individijality  to  the  extent  of  acting  together  in  a common  program,  manufacturers 
have  looked  askance  at  aasociatedactivity  intended  to  better  conditions  in  the 
industry.  Such  associations  as  have  come  into  existence  have  been  sponsored 
chiefly  by  the  more  progressive  and  intelligent  class  of  producers.  They  have 
been  very  distinctly  in  the  minority,  in  consequence  there  has  been  a lack  of 
common  understanding  concerning  t he  situation  in  the  industry.  This  lack  of  co- 
hesion in  the  industry  has  been  further  accentuated  by  the  fact  that  the  lure  of 
speculation  has  drawn  into  the  industry  men  from  different mlks  of  life  differ- 
ing widely  in  e:j5;erience  and  point  of  view.  The  lack  of  common  understanding 
concerning  the  problems  confronting  the  industry,  growing  out  of  the  failure  to 

cooperate,  has  no  doubt  had  its  influence  in  bringing  about  periodic  overpro- 

1. 

duct ion. 

One  of  the  best  illustrations  of  this  diversity  in  point  of  view  is 
the  manner  in  vhlch  the  various  producers  have  copedwlth  depressed  market  condi- 
tions. Some  operators  have  met  the  situation  by  curtailing  thifcir  output;  others 

2. 

by  running  double  shift  in  an  effort  to  decrease  cost  of  production. 

Some  alleviation  from  the  effects  of  overproduction  might  have  been 
secured  if  operators  only  could  have  known  how  to  widen  the  market  for  their 
product,  but,  engrossedas  they  have  been  in  overcoirdng the  difficulties  with 

T. 

Ibid.  pp.  1179-1182. 

2. 

Ibid.  p.  1182. 


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151 

wJilch  the  production  of  lumber  has  been  fraught,  they  have  overlooked  the  in^joi^  ! 

tance  of  learning  to  properly  merchandize  their  product. 

HThat  has  nade  matters  worse  is  the  change  that  has  taken  place  in  the 

character  of  consumption.  Operators  have  gone  on  producing  on  the  assunption 

that  there  is  a more  or  leas  fi:©d  demand  for  lumber.  As  a matter  of  fact  the 

demand  for  lumber  has  been  changingfirom  year  to  year.  The  use  of  substitutes 

has  been  mainly  responsible  for  the  more  or  less  regular  decline  in  the  consuxcp- 

X • 

tlon  of  lumber  that  has  been  taking  place  in  the  past  few  years.  Ineffective 
adjustment  of  output  to  changes  in  the  volume  of  consummation  is  therefore  another 
of  the  reasons  for  overoroductlon. 

2. 

Periodic  overproduction  has  led  to  severe  price  fluctuations.  Oc- 
casional years  of  high  earnings  have  usually  beenf  ollowed  by  periods  of  small 
profits  ora:t\tal  losses.  It  may  be  remarked  in  passing  that  a small  percentage 

of  overproduction  is  sufficient  to  cause  a material  drop  in  prices  because  of  the 

3.  _ 

inelastic  character  of  the  demand  for  lumber.  Instability  of  market  condi- 
tions has  been  abane  to  operator  and  buyer  alike.  I.Iany  financially  wealc  opera- 
tors have  been  forced  to  liquidate  their  investm-ents.  This  weeding  out  process, 
although  of  value  in  some  instances,  in  eliminating  inefficient  producers,  may 
be  carried  too  far;  it  may  lead  t o monopoly,  unless  ways  and  means  are  found  of 
protecting  those  who  produce  efficiently  but  find  themselves  t he  victims  of  un- 
stable market  conditions.  In  some  instances  buyers  have  declared  that  if  the 
open  price  plan  has  the  effect  of  stabilizing  prices  no  objection  to  itsadoption 
among  operators  will  be  raised  bythem.  What  the  buyer  desires  above  everything 
else  is  a stable  market.  In  this  connection  the  secretary  of  the  Ohio  Associa- 


1. 


2. 


3. 


Ibid.  p.  1167. 

Ibid.  p.  1134. 

American  Lumberman,  Oct.  6,  1917. 


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152 


1 

tion  of  Batail  Daniber  Dealers  has  written  the  following:  "I  am  rather  of  the 

opinion  that  this  method  of  stabilizing  market  conditions  will  one  day  be  insisted 
t5>on  as  essential  to  economical  distribution  and  stable  market  conditions." 

Vihen  prices  fluctuate  severely  buyers  are  -uneasy  lest  their  competitors  shall 
succeed  in  b-uying  their  req[ui rement s at  a lov/cr  figure  than  they  have  been  able  to 
do,  and  in  consequence  undersell  them. 

The  public  also  feels  the  effects  of  the  -unstable  conditions  resulting 
from  periodic  ove introduction.  With  amdical  decline  of  prices  many  financially 
embarrassed  operators  feel  impelled  to  lower  the  cost  of  production  by  dumping 
an  increased  output  on  the  market.  The  economic  demand  is  not  such  as  to  warrant 
this  increased  output;  1-uinber  is  therefore  wasted.  Further  waste  is  brou^t  about 
because  of  the  fact  -that  on  a declining  market  it  becomes  unprofitable  to  marke-t 
the  lower  grades  of  lumber,  the  result  being  that  they  remain  unutilized.  In 
his  argument  before  the  Supreme  Court  in  the  Hardwood  case,  Ivlr.  Boyle,  attorney 
for  the  defendants  said,  "If  you  have  a declining  market  in  this  industry,  as  all 
of  the  members  of  this  court  know,  it  must  follov^  that  when  you  get  to  the  point  | 
where  production  cost  is  equal  to  the  price  paid,  only  the  best  part  of  the  log 
will  be  brou^t  to  the  saw,  and  as  aieault  millions  upon  coun-bless  millions  of 

fee-t  of  timber  are  wasted  every  year,  because  they  cannot  afford  to  bring  it  to 

2. 

the  mill."  Of  coiise  the  public  has  to  foot  the  hill  for  this  waste. 

The  remedies  for  the  situation  that  confronts  the  lumber  industry  as 
pointed  out  in  thexeport  of  the  Forest  Service  may  be  s-uimraarized  as  follows: 

1.  A more  adequate  supply  of  capital  for  the  purpose  of  properly  financing  opera- 
tions. 2.  Eeductlons  in  excess  mill  capacity.  3.  Mere  efficient  equipment  and 
technical  methods.  4.  Better  use  of  raw  material.  5.  Better  merchandizing  of 
__ 

Torrence,  Findley  M. , Secretary  of  the  Ohio  Association  of  Eetall  Lumber  Dealers, 
letter  dated  Dec.  31,  1920. 

2. 

* Boyle,  L.  C. , Oral  Argument  before  the  Supreme  Court  of  the  U.  s*  i American  Col. 
and  Lumber  Co.  vs.  U.  s« , Oct.  20,  1920.  ___  ^ 


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153 


the  prod-act.  6.  Sounder  methods  of  accoimting.  7.  Current  puhlicatlcn  of  pri- 

1. 

ces. 

Thevvork  that  Itunber  associations  can  do  in  hringingabout  inprovements 
along  the  lines  indicated  above  is  apparently  deemed  of  considerable  value,  for 
the  report  goes  on  to  say,  "A  ntunber  of  large  trade  organizations  seeking  the  last 
word  in  the  efficiency  of  each  department  would  undoubtedly  benefit  the  whole  in- 
dustry in  extending  its  markets,  eliciting  its  by-products,  and  developing  stan- 
dards of  efficiency  in  all  branches.  Jind  t hey  would  unquestionably  benefit  tlie 

2. 

public  through  improved  service.  Following  this  the  report  proceeds  to  name 
and  describe  the  functions  vMch  such  associations  may  properly  undertake. 
j\ja»ng  these  prominent  mention  is  made  of  the  gathering,  compiling,  and  disserrdnat- 
ing  of  trade  statistics:  "Current  trade  statistics  necessary  to  keep  lumber  man- 

ufacturers informed  on  the  condition  of  the  imrket  . . . include  data  on  the 
voltime  of  orders,  shipments,  and  lumber  stocks  on  hand,  the  prices  which  a re  being 
paid  for  various  grades,  special  demands  for  certain  grades  or  products,  the  price 

and  supply  of  conpeting  materials;  in  avord,  the  information  needed  to  keep  the 

3. 

lumber  manufacturer  in  touch  with  the  market  which  he  supplies.  " Then  f ollows 
a brief  in  defence  of  open  price  work:  "This  activity  of  associations  does  not 

involve  man\ifacturers'  agreements  to  curtail  output  or  fix  prices.  Such  restraints 
of  conpetition  would  be  facilitated  by  the  statistical  work  of  associations,  but 
they  are  totally  different  things.  The  function  of  the  association  is  to  give 
each  operator  individually  the  facts  which  he  needs  to  conduct  his  business  in- 
telligently in  relation  to  the  changing  conditions  of  his  market.  This  function 


1. 

Report  dated  Jan.  24,  1917,  Gadd,  E^diibit  "A",  Record,  American  Col.  and  Lumber 
Co.  vs.  U.  S. , Vol.  2,  pp.  1190-1195. 

2. 

Ibid.  p.  1195. 

3. 

Ibid.  pp.  1197-1198. 


"TT  ‘ ' 


r 


154 


is  doubly  necessary  when  the  market  is  at  a great  distance  from  the  mills. 

"There  is  a clear  cut  line  between  these  services  to  individual  opera- 
tors throu^  an  open  price  association  and  activities  in  restraint  of  trade. 

With  adequate  safeguards  the  xmblic  should  encourage  such  forms  of  cooperation 
among  manufacturers  as  a necessary  means  of  making  the  lumber  Industry  more  ef- 
ficient. The  activities  of  trade  associations  should  be  safeguarded  (1)  by  the 

coopeiution  and  control  of  a responsible  public  agency  like  the  Federal  Trade 

1. 

Commission,  and  (2)  by  systematic  publicity." 

In  a later  report  on  the  lumber  industry  the  nib  rest  Service  of  the 
Department  of  Agriculture  makes  a rather  positive  statement  regarding  t he  stabili- 
zing influence  on  prices  of  the  exchange  of  price  information,  and  its  conse- 
quent benefit  to  seller  and  buyer  alike:  "Solely  as  a matter  of  information, 

the  current  distribution  of  prices  received  by  different  members  of  the  associar- 
tion  tends  to  unify  the  rates  at  which  lumber  is  offered  for  sale  and  to  make  in- 
creases or  decreases  in  accordance  vdth  the  fluctuation  in  the  market  more  near- 
ly similar  at  all  producing  plants.  The  same  information  would  doubtless  be  of 

equal  value  to  buyers  of  lumber,  particularly  to  the  small  buyers  less  able  to 

2. 

keep  posted  upon  market  fltictuations,  if  available  to  them.  " 

No  doubt  the  public  would  profit  immensely  if  remedies  could  be  in- 
voked which  wDuld  prevent  the  tremendous  waste  of  timber  timt  occurs  when, 
throu^  over  production,  prices  decline  so  radically  as  to  make  it  unprofitable 
for  operators  t oatterrpt  to  narket  the  lower  grades  of  lumber.  The  exchange  of 
information  among  producers,  is,  as  the  re^jort  of  the  Forest  Service  makes  clear, 
not  the  sole  remedy,  but  it  certainly  has  a very  important  part  to  play  in  elim- 

T.  ^ 

Ibid.  p.  1198. 

2* 

Beport  by  the  Forest  Service,  U.  S.  Department  of  Agriculture,  Timber  Deple- 
tion, Lumber  Prices,  Lvimber  Eaports,  and  co^icentration  of  Timber  OYpiership, 
issued  Jijne  1,  1930,  p.  68. 


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155 

inating  unsatisfactory  conditions.  This  is  particularly  true  because  it  has  been 

found  next  to  Irmosslble  to  arrive  at  the  cost  of  producing  individual  items  of  || 

il 

lumber.  In  the  logging  operations,  "it  is  almost  ln5)Osslble  to  allocate  the  cost  | 
to  the  various  ^ecies,  although  there  is  known  to  be  a difference  in  the  cost  of 
handling  t hem,  by  reason  of  the  difference  in  the  size  of  the  logs,  the  relative 
positions  in  which  the  various  species  grow  inthe  forest,  etc.  Even  if  suchdlf-  | 
ference  could  be  ascertained  so  that  the  logging  cost  would  be  allocated  properly  | 
to  each  ^ecies,  or  even  to  each  log,  the  continuity  of  this  allocation  could  not  | 
be  maintained,  because  various  grades  and  sizes  of  lumber  are  produced  from  each 

1.  j 

log."  Therefore  in  establishing  a selling  price  for  each  grade  the  producer 
Ims  no  cost  basis  to  guide  him.  it  costa  no  more  to  produce  the  better  grades 
than  it  does  the  poorer,  but  a considerable  proportion  of  the  latter  will  not 
bring  a price  that  will  cover  the  cost  of  production.  In  order  to  secure  a pro- 
fit a good  enou^  price  must  be  secured  fort  he  better  grades  to  insure  that  the 
average  price  received  on  all  varieties  of  grades  and  kinds  is  higher  than  the 


average  cost  of  production.  It  is  clear  from  these  statements  that  in  establlsh-| 
ing  a selling  price  for  each  grade  the  producer  has  a very  inadequate  cost  basis 
to  guide  him.  Finding  that  he  cannot  use  costs  as  a proper  basis  for  determining 
selling  price,  he  is  at  sea  regarding  a solution,  unless  he  can  secure  informa- 
tion of  a kind  that  will  give  him  an  idea  of  the  trend  of  the  market.  Hence  he 
finds  that  a knowledge  of  conditions,  such  as  is  afforded  him  by  membership  in  an 
open  price  association  is  a moat  valuable  asset  in  forjaulating  a selling  policy. 

No  doubt  a widespread  knowledge  among  producers  of  the  vital  market 
and  trade  statistics  would  go  a long  way  toward  eliminating  the  conditions  which 
are  responsible  for  the  maladjustment  of  demand  and  supply,  and  which  leave  a 
heritage  of  economic  waste  that  must  be  borne  by  the  public.  Beingvsell  informed, 


1. 


2. 


Stark,  M.Y/. , Record,  American  Co^l.  and  Lumber  Co.  vs.  U.  S. , Vol.  2,  p. 


Ibid,  p.  1247. 


1246. 


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156 

producers  probaTaly  would  find  it  to  their  interest  to  direct  their  production  in 

such  a way  as  to  bring  about  a more  normal  adjustment  of  supply  to  demand.  If, 

for  instance,  they  should  find  that  the  stodca  of  a certain  item  are  low,  and 

orders  seem  to  be  well  sustained,  they  would  undoubtedly  accentuate  production 

of  that  item  in  the  hope  of  getting  the  benefit  of  higher  prices  that  might  be 

expected  to  resiilt  from  the  low  condition  of  stocks,  other  hand,  if 

orders  for  an  item  should  show  signs  of  declining,  v/hile  stocks  seemed  to  be  well 

st^plied,  and  in  reflection  of  these  conditions,  prices  should  show  signs  of 

sagging,  no  doubt  the  well  informed  producers  would  cut  down  production  of  the 

item  affected.  In  the  one  case,  vrfaere  production  is  stimulated,  a stringency  of 

_ » 

supply,  accongianied  by  an  abnormally  high  price,  is  prevented.  In  the  other 
case,  where  production  is  diminished,  an  oversupply,  accompanied  by  an  abnormally 
low  price,  is  prevented.  In  other  worde,  supply  comes  to  be  adjusted  to  demand 
at  more  or  less  normal  price  levels.  As  a consequence  the  sudden  dips  of  prices 
that  have  so  often  made  it  unprofitable  to  atterrpt  to  market  any  but  the  best 
grades  of  lumber  tend  to  be  eradicated.  With  prices  confined  to  normal  levels, 
the  prospects  for  profitably  marketing  the  poorer  grades  are  greatly  enhanced. 

On  the  assurrotion  that  this  is  the  result,  the  public  profits  thereby  through 
the  conservation  of  its  timber  resources. 


■Sv.W'' 


rr.L  rrol?:  . I '-;  • Ov’  • ■irrr;i:  'lien’.'  d*  \ -:1.1  .Mr.)'^.  ^;>.c  i^^-’iiTC" rX,r-:v 

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13  a::  ic  ..w;--  Ei-al'^a  : ilr.c:,  'izr-iv<l  :■/.)•.  ' . i. 

■^o  "*r^g  iX7ob  iir.j  jiotq  |(.€eno*  :.‘  t-.«w  »*.'^  .'cik706  ,ot»-' 

-0  xc.  11.-I. ' liiihff  ,^'^.'&z.  i>r^  ■bi^i  --I  . tt  1. 

-^J.i  ;:I  . 33’.v'v?-i-i  iii  ,Mh. ' . .jj  iriS-^oc;5«  ,r,Xc5;7.. 

Xli.. .-■: X.  .' :>t  *,  7' _ ,*»_.j[cau':’.vo  lii.  ai  a ,Si.ia 

. ''  - r 

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. ■>: 'i'ii  s.-:  ri3  ’To'roau  v.;if  .=•■£•■  -'n.-  . v;,<f*3 n*:'i  'i 6 ;a4C:;5.o'Xq,  »ri'J- 


Ti^'Cru'f  •yc'j  :, 


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■ ■■  I 'j  T • i V *T  ■„  ©{fe:  f r j 'n 


•r 


-^,  s’i 


157 


CHAPTER  VIII 

KEGaLATORT  ASPECTS  OE  OPEN  PRICE  ACTIVITY 

The  aim  in  this  chapter  is  not  to  pass  an  opinion  upon  the  legality 
of  the  open  price  plan,  but,  first,  to  call  attention  to  such  court  cases  as 
attorneys  consider  have  a bearing  on  the  plan;  second,  to  review  sach  opinions 
relative  to  the  plan  as  may  have  been  expressed  by  prominent  members  of  the 
legal  fraternity;  third,  to  briefly  recount  activities  engaged  in  by  so-called 
open  price  associations,  that  may  be  considered  in  contravention  of  law,  and 
suggested  remedies  for  these  a'oises;  fourth,  to  interpret  the  attitude,  assumed 
by  various  departments  of  the  Federal  Government  toward  the  plan. 

Members  of  open  price  associations  are  in  a quandary  as  to  their 
standing  before  the  law.  The  question  at  issue  is  whether  the  activities  of 
these  associations  are  in  viola,tion  of  State  and  Federal  anti-trust  laws.  Per- 
haps the  fundamental  proposition  involved  reduces  itself  to  this  question; 
are  members  within  their  lawful  rights  in  associating  for  the  purpose  of  fur- 
nishing each  other  vdth  accurate  information  of  conditions  in  the  industry  in 
v;hich  they  are  engaged,  including  stocks  on  hand,  rate  of  production,  and 
prices  at  which  the  product  has  been  sold,  and  does  such  asaociation  cease 
to  be  lawful  because,  being  informed  by  the  knowledge  so  obtained,  but  with- 
out agreement  of  any  kind,  the  individual  members  may  ask  different  prices 
or  produce  in  different  quantities,  tlaan  they  would  have  don^  had  they  not 
been  so  informed? 

Eor  the  first  timie  an  opportunity  has  been  afforded  the  Supreme 
Court  of  the  United  States  of  determining  the  legality  of  the  open  price 
plan.  The  defendants  involved  are  the  miemibers  of  the  American  Hardwood 
Manufacturers'  Association.  They  made  an  appeal  from  the  final  decree  of  the 


1 


•iV. 


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i.nit  <1-.- 


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.■•i 


oi  ■'-7, 


158 


District  Co-art  in  the  Western  District  of  Tennessee,  Western  Division,  in  a 
pi’oceeding  iDrouglit  "cy  th.e  United  Ctates  rnder  the  Sherrrian  ibati-Tm.st  Act,  to 
enjoin  them  from  continuing  an  alleged  comhination  to  enliance  the  of 

hardv/ood  Itunher.  Tliere  were  339  corporations,  firms,  and  individtials  in- 
volved. All  were  inemoers  of  the  "Open  Corapctition  Plan”  of  the  association. 
The  alleged  conspiracy  to  enhance  prices  began  in  Jantiary#  1^1“,  and  con- 
tinned  to  the  date  of  the  filing  of  the  hill  of  complaint  in  Dehr’a-ry,  1920. 

The  alleged  means  of  accomplishing ' this  conspiracy  may  he  hriefljr 
described  as  follows: 

1.  Compiling  and  distributing  monthly  stock  reports  and  prod-action 

reports. 

2.  Printing^  and  distrih-ating  monthly  bulletins  which  called  at- 
tention to  a shortage  of  hardwood  lumber  and  adrAonished  mern’iers  to  enact 
higher  prices,  ‘but  not  to  meet  the  shortage  by  increasing  production. 

3.  Compiling  and  distrib-r.ting  weekly  sales  reports. 

4.  Printing  and  distributing  a b-alletln  containing  excerpts  from 
commendatory  letters  v/hich  the  seci-etary  received  from  members,  and  v/hich 
were  alleged  to  have  been  explanations  by  members  of  the  roanne-r  in  which  the 
rex^orts  of  sales  were  -ased  in  enhancing  future  x-J^ices. 

5.  Discussing  prices  at  rxicnthly  gro*ap  meetings  ”so  as  to  produce 
raatual  axiproval  for  high  prices  received,  and  mutual  oral  predictions  that 
high  prices  would  continue.  " 

6.  Compiling  and  distributing  monthly  reixilies  to  qpaestionnaires 
’’constituting  an  exchange  of  written  predictions  by  the  d efsndants  that  prices 

X 

would  continue  high.  ’’ 

T. 

Prief  for  the  United  States,  American  Colnmn  and  Limiber  Co.  et  al.  vs. 

United  States,  pp.  2,  3. 


159 


The  G'ain  attack  of  the  G-ovemnent  was  diractod  at  the  iiiivrket  letters 
which  the  Manager  of  Statistics  issued  to  inemhers  at  irregular  intervals.  The 
defendants  in  their  answer  adnutted  tliat  they  were  exchanging  infonnation  of 

the  kind  described  in  the  bill  of  complaint  but  denied  tliat  this  activity  was 
carried  on  as  a means  of  accomplishing  by  collusion  the  enhancement  of  prices 


or  the  curtailrr;ent  of  production. 


The  j'adge  in  the  case  decided  tliat  there  was  "a  corarr.on  note  running 
through  all  the  evidence,”  namely”* increase  in  prices,’”  and  therefore 
granted  an  irgmction  '.vliich  permanently  forbade  defendants  to  ;a,rticipate  in 
any  open  price  activit^^. 

On  appeal,  the  case  went  direct  to  the  Snprorne  Court.  Hearings 
were  held  on  October  20,  1820.  Apparently  the  Corrt  lie,o  not  been  satisfied 
'vith  the  evidence  then  presented  because  there  is  to  be  a rehearing  on  April 
11th,  192j^.  Bu-siness  men  who  are  interested  in  the  open  price  plan  hope 
that  the  Court  ’Adll  give  the  question  of  legalit3A  of  the  open  price  pl.an  a 
broad  and  conrp rehen sive  treatment  and  that  some  fixed  general  rules  of  a 
constractlve  nature  will  be  laid  dov.ii  which  '.-dll  malce  clear  to  vdiat  extent 
cooperation  may  be  legitimately  carried  on. 

To  enter  into  the  merits,  pro  and  con,  of  the  Hardwood  case  from 
a legal  point  of  view  would  lead  the  writer  into  a ramification  of  legal 

1 

discussion  31-ch  as  he,  as  a iayrran,  does  net  feel  competent  to  undertalce. 

At  all  events  it  is  thcuight  that  such  a discussion  would  lead  aw^^  from  the 
real  point  at  issuj.e,  namaly  the  legality  of  the  open  price  plan  taken  in 

n 

In  chapter  7 is  a short  discussion  to  the  effect  that  the  rise  in  price 
of  hardwood  lumber  can  be  explained  bjr  attributing  it  to  naf-.ral  causes. 

See.  pp.  145-148. 


160 


the  abstract.  The  reason  for  this  x:oint  of  view  is  that  the  charges  Tie.de  by  the 
Government  against  mLembers  of  the  Ainerican  Hardwood  Lh^nufactiirers’  Association 
n'2Jir  he  regarded  as  being  directed,  not  against  the  plan  as  conceived  hy  Mr.  Eddy 
hat  against  an  aha.se  of  the  plan.  Statements  were  made  in  meetings  and  halletins 
which  the  Government  alleges  were  evidence  of  a conspiracj’’  to  suppress  cornosti- 
tion.  These  statements  were  not  necessary  accompaniment s of  the  open  trice  plan. 
In  fact,  it  is  thought  that  isn  open  price  association  under  the  g-.-idance  of  Mr. 
Eddy  or  his  associates  would  never  have  allovired  loose  statements  of  the  kind  made 
the  Ijanager  of  Statistics  and  msmhers  of  the  Hardwood  association  to  gain 
currency.  Tlie  G-ovenament  took  occasion  to  condemn  the  open  price  plan  because  it 
seemed  to  be  the  Instrament  by  v/hich  the  alleged  conspirac;^  was  consiarmated.  If 
it  v;as  so  a.sed  it  ccnstitaped  an  abuse  of  the  p3.an.  Ih*sn  if  the  coart  did  estab- 
lish that  the  alan  was  so  abused,  tl:at  fact  could  not  be  remardsd  in  the  light 

1 

of  a dem.onstration  that  the  plan  when  not  so  abused  v/ould  be  illegal. 

The  v;ritsr,  ho'.vever,  does  feel  justified  in  recording  an  objection  to 
the  method  employed  by  the  Governiicnt  in  presenting  its  evidence,  in  the  Hard- 
v;ocd  case.  Isolated  excem.<ts  from  letters  or  minutes  of  meetings  were  cited  or 
(pc.cted,  and  then  strrng  to  ^ther  so  as  to  fit  in  with  the  theory  of  the  Crovem- 
m.ent.  As  a result,  in  reading  the  evidence,  one  gets  an  entirely  different  con- 
ception of  its  character  than  he  would  if  the  phrases  were  read  in  connection 
\vith  their  context.  In  many  instances  the  evidence  so  presented  is  grossly 
distorted  or  li’dsleading,  - as  one  will  discern,  by  reading  the  letters  or  mino'.tes 
of  meetings  them.se Ives. 

Eelix  H.  bevy,  a prordnent  attorney  of  ITew  Ycrl:  City  states  in  a letter 
to  tlie  writer,  "You  will  find  t’lat  the  matters  complained  against  by  the 
Government  went  far  boj^’Chd  the  usua,!  procedare  corrmonlj’’  described  as  "‘‘ox^en 
competition'".  Mnerefore  the  decision  of  the  Coa.,rt  In  overm^ling  the^^^eracrrer 
cannot  he  deemed  to  m.ean  a specific  finding  of  illegality  against  the  open 
com-etion' " .rinciule." 


BHiiMiiiiWMi 


161 


DECISIO'^G  ^PLICAETE’  TO  TIIE  0?IT:T  PPICE  SYSTEM 


Barring  the  opinion  handed  do\m  hy  the  lassonri  Supreme  Court  in  the 

T 
X 

Yellow  Pine  case,  s^-ch  case  law  as  seems  to  touch  on  the  legality  of  open  price 
v;orh  is  limited  to  opinions  rendered  in  the  lower  federal  courts.  In  the  I^rdwood 
case  Judge  McCall,  who  handed  dovmi  the  decision,  did  not  state  mender  what  circnir- 
stances,  if  any,  open  price  work  would  he  considered  legal.  He  confined  his  re- 
marks to  a condemnation  of  the  criminal  acts  alleged  to  hams  been  committed,  these 

oeing^of  a character  tnat  may  properly  he  designated  as  an  ah'.'se  of  the  open  nrice 
plan. 

The  opinion  most  often  cited  hy  proponents  of  the  open  price  _olan  as  i 
axcating  specific  approval  of  this  character  of  activity  was  given  hy  Judges 
B'mffington,  Hvnt,  McPherson  and  Yooley  in  the  famo^ns  Steel  Case.  In  commenting 
on  the  G'aE’’  Dinners  they  q_uoted  wdth  approval  the  Government' s concession  in  the 
original  petition:  "It  is  not  here  alleged  that  merely  assembling  and  arrtvally 

exchanging  information  and  declaration  of  puimose  amo-,mt  to  an  agreement  or  a 
comoination  in  restraint  of  trade  "an.d  added,  "v/hsn  the  business  is  manvfactrring, 
of  course  all  this  has  a direct  hearing  on  the  subject  of  prices,  and  these 
cor^ferences  may  therefore  consider  th^t  subject  specifically."  libwever  the 
judges  went  further  than  this,  and  made  it  clea,r  that  it  would  be  peimissible 
for  individ'mls,  who  were  really  acting  for  themselves,  to  make  announcement  of 
future  prices  but  implied  that  what  ix.y  be  granted  to  an  individual  may  be  denied 
on  association  of  individuals.  The  language  used  was  as  follows: 


Por  an  extended  account  of  this  case  see  chanter  7,  PP*  132-137. 

« • 

See  opinion  of  Judge  McCall,  list.  Court  of  ’h  S.  v/estem  District  of  Tenn. 
^/estem  division,  in  epiity  Ho.  751;  . S.  vs.  American  Col.  1 Lum.  Co.  et  al. 

bhiited  States  vs.  United  States  Steel  Cor;  ora,tion,  223  Fed.  pu . 1o4-151d;  also 
Todd,  G.  C.  , Argument  before  the  Supreme  Court,  qc":.  2C,  1920,  Airaric^m  Col. 

& pum..  Co.  vs.  TT^ited  States. 


162 

"j\ni  if  each  individraal  shouli  chcose  to  aJincimce  at  s”ch  a iTieeting  the  s--3cific 

price  he  intends  to  charge  for  his  v;ares,  weare  aware  cf  no  law  that  foroids  him 

so  to  3o.  Bnt  at  this  point  we  approach  debatable  ground,  for  an  indii’-idral  is 

remitted  to  do  sone  things  that  are  denied  to  an  association  of  individuals." 

In  concluding  this  phase  of  the  opinion,  it  was  stated  that  a decision  as t o the 

legalitv  of  this  procedure  would  depend  upon  the  fact  as  to  whether  the  action 

in  annc-uncing  future  prices  "w-as  really  tolten  by  each  individual  acting  for  Mm- 

2 

sGxi,  or  whetner  those  present  ivere  in  fact  pursuing  a coma.on  object." 

Attorneys  associated  with  open  price  associations  have  construed  this 
opinion  to  mean  that  there  exists  an  implied  distinction  bst\7een  past  and  futr^re 
-rices,  -^.^r.  Eddy  constricted  the  open  price  plan  on  the  theory  that,  although  a 
discussion  and  declaration  of  intent  as  to  future  prices  in  all  probability 
uuuld  res^ilt  in  an  agreement  ..3  to  future  ^.rlces,  no  such  danger  wouJ.d  be  con- 
fronted if  discussions  and  declarations  were  confined  to  p^^st  prices.  However 
it  aay  be  interpolated  thatthis  line  cf  distinction  night  become  exceedingly  fine. 
As  the  !.5anager  of  Statistics  of  the  American  Hardwood  ranui’act'irers'  Association 
once  remarked,  "If  you.  know  what  your  ccrmetitor  has  done  up  to  last  week  or 

last  night,  you  are  pretty  close  to  knowing  what  he  will  do  tomorrow  and  vou  can 

3 

act  accordingly,  ulth  intelligence  and  wisdom.  " 

4 

In  the  Chicago  Board  of  Trade  Case  the  court  stated,  "It  is  an  unhealth 
condition  of  dffalrs  whsre  t-.en  are  oonieiied  to  liny  and  sell  ndthont  adequate 
kncv;lee.ge  of  acfcal  narket  conditions."  In  this  case  it  was  decided  tliat  a rule 


Ibid,  p.  165, 

Ibid,  p.  155. 
3 

Dec 


^/jin^l  .£^ort  0*  tne  -ana^er  of  btatistics,  Dec.  1919,  Air.erican  Luiubenraai, 
246  Tj.  '3.  ^ 33P. 


163 

adopted  hy  the  Chicago  Board  of  Trade  fixing  the  price  at  which  nemterB  should 

"buy  grain  from  country  dealers  and  farmers  between  the  closing  of  the  exchxange 

on  one  day  and  the  opening  on  the  next  did  not  have  the  effect  of  suppressing 

or  destroying  competition,  hut  only  to  reasonably  regulate  it.  One  of  the 

grounds  for  sustaining  this  rule  was  that  it  purnosed  to  correct  evils  that 

1 

l^d  resulted  from  ignorance  of  market  conditions.  This  decree  is  often  cited 
by  attorneys,  representing  open  price  associations,  in  support  of  their  asser- 
tion tlmt  even  though  it  be  true  that  open  price  work  has  a regulatory  effect 
on  conpetition,  the  illegality  of  such  activity  is  therefore  not  established, 

because  as  was  stated  in  the  Steel  Case,  the  Sherman  Act  ” ' does  not  compel 

2 

competition,  nor  recjuire  all  th;it  is  possible.***  Attorneys  for  open  price 
associations  contend  that  the  only  manner  in  which  open  price  work  **regulates” 
competition  is  in  the  sense  of  enabling  members  to  determine  their  price  and 

production  policy  in  the  light  of  accurate  knov/ledge  of  conditions  in  the 
indust  ry. 

In  the  case  of  the  United  States  vs.  Heading  Company  it  was  dis- 
closed that  there  had  been  an  exchange  of  information  among  carriers  and  pro- 
ducers of  anthracite  coal  under  the  auspices  of  "The  Bureau  of  Anthracite  Coal 
Statistics.**  To  this  bureau  members  reported  monthly  their  tonnage,  their 
sales  at  New  York  Harbor  and  Brooklyn  and  prices  charged.  From  these  data 
the  secretary  of  the  bureau  made  up  a conposite  report  showing  the  tonnages, 
sales  at  New  York  Harbor  and  Brooklyn,  and  the  prices  of  each  member.  The 

T.  ^ 

Board  of  Trade  of  Chicago  vs.  United  States,  246  U.S. , 231,  quoted  in  Brief 
for  Appelants,  American  Col,  & Lum.  Co.  vs.  U.  S. . p.  52. 

2.  ’ ^ 


U.S.  vs.  U.  S.  Steel  Corporation,  223  Fed.  Hep.  , quoted  in  argument  of  Todd, 

G.  C.,  before  Supreme  Court,  Oct.  20,  1920,  American  Col.&  Lum.  Co.  vs.  United 
States. 


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164 


report  was  sent  to  members  of  the  plan.  The  court  held  that  his  arrangement 
was  not  in  violation  of  law. 

In  the  case  of  the  United  States  vs.  Aileen  Coal  Co.  et  al,  it  was 
charged  that  members  had  combined  to  enhance  the  price  of  coal  by  agreement. 

One  item  of  evidence  related  to  the  exchange  of  information  among  members  re- 
garding their  sales  and  pricee.  In  giving  his  instructions  to  the  jury,  Judge 
Grubb  said  in  part  as  follows: 

”It  is  the  right  of  every  man  in  business  involving  the  sale  of 
his  product  to  seek  to  acquire  as  full  information  as  to  the  conditions  in  the 
market  in  which  he  is  selling  his  product  as  he  can,  and  it  is  also  entirely 
within  the  right  of  persons  in  the  t rade  to  share  that  information  openly  among 
themselves.  Nor  does  the  mere  fact  that  they  accompanied  this  interchange  of 
information  with  statements  as  to  what  eachexpects  to  try  to  obtain  for  his 
product  in^itself  constitute  such  action  a combination  within  the  meaning  of 
this  Act.  ” 

In  the  case  of  the  State  vs.  Arkansas  Lumber  Co. , the  court  held: 

”If  in  the  instant  case  therehad  been  touching  this  price  current  matter  no 
antecedent  unlawful  acts  of  the  Yellow  Pine  Association,  if  this  association 
had  not  for  years  promulgated  as  current  prices  lists  which  falsely  represented 
and  arbitrarily  fixed  the  prices  of  yellovi^  pine  lumber  pursuant  to  the  adopted 
report  of  a committee  on  values,  and  if  Smith,  the  secretary  of  the  associa- 
tion, pursuing  the  lawful  methods  originated  by  him  of  obtaining  reports  from 
correspondents  of  actual  sales,  had  fairly  compiled  and  averaged  such  reports 
into  a list  of  current  prices  of  yellow  pine  lumber,  we  would  not  say  that 

Y,  ■ 

United  States  vs.  Reading  Company,  183  Fed.  Rep. , quoted  in  Argument  of  Todd, 

. C. , before  Supreme  Court,  Oct.  20,  1920,  Atrierican  Col.  & Lum.  Co.  vs.  U.  S. 

United  States  vs.  Aileen  Coal  Co.  et  al. , U.  S.  District  Court,  Southern  Dis- 
trict of  N.  Y.,  Brief  for  Appelants,  American  Col.  & Lum.  Vo.,  vs.  U.  S. , p.  64. 


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165 


Smith's  acts  or  the  acts  of  the  association  in  his  hehalf  were  unlawftil.” 

In  the  case  of  the  United  States  vs.  the  Eastern  States  Eetail  Inmher 
Dealers  Association,,  the  principle  was  laid  down  that  when  information  is  ex- 
changed forthe  obvious  purpose  of  suppressing  competition  or  raising  prices,  it 
becomes  illegal  to  distribute  such  information.  The  defendants  who  were  re- 
tail lumber  dealers,  compiled  and  distributed  among  themselves  from  time  to 

time,  lists  of  manufacturers  of  lumoer  and  wholesale  dealers  who  sold  directly 
to  consumers.  The  object  in  so  doing  was  ”to  cause  retailers  receiving  these 
reports  to  withhold  their  patronage  from  listed  concerns."  The  court  held  that 
this  object,  namely  to  boycott  those  who  sold  direct  to  consumers,  was  illegal, 
and  members  were  enjoined  from  continuing  to  distribute  this  class  of  infoimation 
A similar  decision  was  handed  down  in  a case  involving  members  of  the  Norwestem 
Lumbemen's  Association,  i.e.  United  States  vs.  Hollis  et  al,  where  the  pur- 
pose also  v®,s  to  prevent  manufacturers  and  wholesalers  from  sellinc'-  direct  to 
3 

consumers. 

The  cases  here  reviewed  were  brought  into  evidence  by  the  defence  in 
the  Hardwood  case  in  an  attenipt  to  prove  the  validity  of  the  furnishing  of 
information  through  the  medium  of  an  open  price  association  when  the  object  is 
merely  to  keep  members  posted  on  market  conditions,  no  purpose  of  using  such 
information  to  restrain  trade  being  in  contemplation.  The  Government  cited  no 
decisions  Involving  the  question  as  to  the  validity  of  exchanging  information 
1. 

State  vs.  Arkansas  Lumber  Co.,  169  S.  W. , 177. 

Eastern  States  Eetail  Lumber  Dealers  Association  vs.  U. S.,  234  U.  S.  600, 
quoted  in  Brief  for  appelants,  American  Col.  & Lum.  Co.  vs.  U.  S. . p.  71. 

3. 

246  Fed.,  611,  quoted  in  Brief  for  appelants,  American  Col.  & Lum.  Co. 

U.  S. , p.  71. 


vs. 


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166  n 

tlircugh  tli6  msdiiim  of  3,  ’tr&dc  &ssocl3.tion<  The  ca.ses  cited  may  therefore  pro- 
bably be  considered  representative  of  the  drift  of  court  opinion.  The  legality 
of  the  practice  has  apparently  been  sustained  in  every  case.  These  decisions 
nay,  of  course,  be  disregarded  in  the  opinion  which  it  is  expected  the  Supreme 
Court  will  hand  down  in  the  near  future. 

EXPOSITIONS  OF  TEE  LAW  HELATING  TO  THE  0PM  PRICE  PLAN 

Turning  to  a coisideration  of  the  point  of  view  of  attorneys,  a 
considerable  number  hold  that  the  collection  and  distribution  of  vital  statis- 
tics through  the  medium  of  an  open  price  association,  when  properly  conducted, 
is  legal  beyond  doubt.  Mr.  Arthur  Jerome  Eddy,  the  "father”  of  the  open  price 
plan,  was  to  the  time  of  his  death  the  most  conspicuous  defender  of  the  plan. 
Others  are  Judge  Dickinson,  who  was  prosecutor  for  the  Government  in  the  Steel 
Case;  Mr.  Elmer  H.  Adams,  of  Adams,  Childs,  Bobb  & We  scot  t,  Chicago;  Mr.  B.  K. 
McCloskey,  of  Kinnear,  McCloskey  and  Best,  Pittsburgh;  Mr.  Henry  A.  Wise,  late 
United  States  District  Attorney,  New  York  City;  Mr.  Rush  C.  Butler,  of  But- 
ler, Lamb,  Foster  and  Pote,  Chicago;  Mr.  Win.  J.  Mathews,  of  Wetten,  Ifethews 
& Pegler,  Chicago;  Mr.  James  L.  Bruff,  New  York  City;  Mr.  Clark  McKercher,  | 
former  assistant  to  the  United  States  Attorney  General,  of  McEercher  & Liri, 

New  York  City;  and  W.  F.  Lehmann,  of  Lehmann  and  Lehmann,  St.  Louis. 

What  is  caisidered  the  most  famous  exposition  of  the  law  relating  to 
open  price  activity  is  that  which  Mr.  W.  F.  Lehmann  gave  to  the  secretary'  of 
the  Yellow  Pine  Ivlanufacturers'  Association,  in  a letter  dated  April  8,  1909. 

Mr.  Joseph  E.  Davis,  Commissioner  of  Corporations,  regarded  this  exposition  of  | 
sufficient  worth  to  incorporate  in  the  volume  devoted  to  "Trust  Lav/s  and  Unfair 

r. 

Mr.  Eddy  died  in  July,  1920. 


167 


C5onrpetition”  which  came  out  as  a putlication  of  the  Bureau  of  Coroorations  of  the 

Department  of  Commerce,  March  15,  1915.  The  Commissioner  describes  Mr.  Lehmann 

1 

as  "an  eminent  member  of  the  American  bar."  As  far  as  the  writer's  observation 
goes,  expositions  of  the  law  contributed  by  other  attorneys  have  been  essentially 
a rehash  of  the  arguments  presented  In  this  document.  Because  of  its  importance, 
as  embodying  the  interpretation  put  upon  the  law  by  a large  number  of  prominent 
attorneys  who  firmly  believe  in  the  validity  of  the  open  price  plan,  it  is  here 
given  in  full: 

"*  Mr.  George  K.  Smith 

St.  Louis,  Missouri. 

"'Dear  Sir:  I have  given  due  co nsideration  to  the  matters  we  talked  about  on 

Tuesday  and  have  found  no  occation  to  change  the  opinion  then  expressed. 

"'YOU  have  the  undoubted  right  to  collect  and  distribute  the  fullest 
information  you  can  get  of  what  is  being  done  in  the  lumber  field,  with  all  de- 
tails as  1 0 the  amount  of  production  from  day  to  day,  the  stock  on  hand,  prices 
asked  and  received,  etc.,  and  every  man  who  receives  this  information  has  the 
right  to  act  upon  it  as  he  thinks  proper.  If  he  thinks  more  is  being  produced 
than  can  be  sold,  he  can  reduce  the  amount  of  his  cutting,  or  cease  cutting  alto- 
gether if  he  chooses,  -until  conditions  improve. 

Beyond  this,  however)  you  can  not  go.  There  can  be  no  agreement  or 
understanding  between  two  or  more  lumbermen  to  limit  their  production  and  there- 
fore no  coarse  of  conduct  from  which  such  an  agreement  or  pnderstanding  could  be 
inferred  by  a court  or  a jury. 

If  some  man  should  go  from  one  lumberman  to  another  getting  from 
each  a statement  or  a promise  that  he  would  limit  his  output  in  the  future  and 
what  each  man  thus  said  was  communicated  to  the  others,  and  if  this  were  followed 
i! 

Davis,  Joseph  E.,  Trust  Laws  and  Unfair  Competition,  p.  715. 


168 


by  a limitation  of  the  output,  a court  or  a jury  would  be  very  likely  to  infer, 
despite  all  protestations  to  the  contrary,  that  the  limitation  of  outimt  was  the 
result  of  an  agreement  or  understanding. 

So,  too,  if  one  lumberman  after  another  declares  that  he  will  here- 
after curtail  his  production  and  they  inform  each  other  of  this  purpose  and  then 
act  in  accordance  with  their  declarations,  a court  or  a jury  would  be  very  likely 
to  infer  that  this  was  all  in  pursuance  of  an  agreement  or  understanding. 

V/hat  is  in  fact  being  done,  each  and  all  have  a right  to  know.  This 
is  no  more  than  is  done  every  day  by  the  market  reports  in  our  newspapers.  They 
show,  for  example,  the  daily  receipts  of  grain  and  livestock,  the  prices  received, 
information  as  t o the  visible  supply,  etc.,  and  farmers  individtially  govern  thera- 
selves  accordingly.  The  man  not  pressed  for  money  does  not  ship  his  grain  or 
livestock  to  a glutted  market.  The  lumberman  may  undoubtedly  get  like  informa- 
tion as  to  his  business  and  may  determine  his  conduct  by  it. 

But  the  action  based  upon  this  information  must  be  individual  and 
independent.  If  he  concludes  for  himself  that  the  market  is  overloaded  and  that 
he  cannot  produce  at  a profit,  he  may  curtail  or  cease  producing  altogether  and 
for  as  long  a time  as  he  pleases,  but  if  he  concludes  that  ha  will  continue  as 
he  is  doing,  tmless  his  competitors  will  also  curtail  or  cease  production,  and 
there  is  a curtailment  or  a cessation  as  a result  of  any  sort  of  a preconcert, 
agreement  or  understanding,  the  law  is  violated. 

The  conditions  of  the  trade,  however  bad;  the  price  of  lumber, 
however  lov/;  the  persistence  of  luxnbermen  in  cutting  an  amount  above  the  market 
demands;  will  not  legalize  an  agreement  among  any  number  of  them  to  limit  the  out 
put  of  their  commodity  or  to  fix  the  price  of  it.  The  policy  of  the  law  is  free 
competition  and  it  plainly  requires  that  each  producer  shall  conduct  his  business 
independently  of  any  compact  with  his  coni^jetitors.  This  does  not  prohibit  any 


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169 


prodacer  from  talcing  into  accomit  all  the  conditions  of  "business  in  detezmining 
his  own  conduct,  and  it  does  not  forbid  cooperation  for  the  purpose  of  obtaining 
information  that  is  useful  to  each  and  to  allt 

' I repeat,  however,  that  beyond  the  collection  and  distribution  of 
information  as  to  what  is  being  done,  you  cannot  go,  and  can  not  state  too  strong- 
ly that  any  agreement  or  understanding,  no  matter  how  Indirect  the  means  by  which 
it  is  brought  about,  falls  under  the  bam  of  the  law# 


Respectfully  yours. 


F,  W.  Lehmann*  ' " 


Some  attorneys  apparently  believe  that  the  operation  of  the  open  price 

plan  roust  inevitably  lead  to  a violation  of  the  law  because  the  plan  provides 

3 

exceotional  facilities  for  the  accomplishraent  of  illegal  acts,  but,  as  far  as 
the  writer’s  observation  goes,  few,  if  sny,  take  the  ground  that  the  open  price 
plan,  considered  in  the  abstract,  is  in  and  of  itself,  illegal. 

The  practice  of  members  exchanging  price  lists  throxighthe  medium  of 
a secretary,  regarded  in  many  quarters  as  an  integral  part  of  the  open  price 
plan,  and  engaged  in  by  fully  as  many  associations  as  pursue  the  other  method 
of  reuorting  only  actual  transactions,  has,  however,  met  with  disapproval,  ^r. 
Eddy,  the  ’’father"  of  the  open  price  plan  is  among  those  who  declare  the  inter- 
change of  price  lists  to  be  illegal.  During  the  Babson  conference  on  Cooperative 
Competition  held  in  October,  1914,  various  open  price  plans  then  in  operation 
were  discussed  and  a final  coiiposite  opinion  of  a plan  which  would  cover  many 
lines  of  business  was  drawn  up.  Section  three  of  the  plan  provided  tnat  "Each 
member  shall,  without  previous  consultation  or  agreement  upon  the  subject  with 
any  other  member,  make  up  a price  list  of  net  prices  or  discounts  as  eacn  class 
of  goods  may  require,  which  shall  be  the  lowest  prices  at  which  he  cares  to  sell, 

Davis,  Joseph  E.,  Trust  Laws  and  Unfair  Competition,  p.  ?15. 

2*Mr.  Samuel  Untermyer,  an  attorney  of  repute,  practicing  in  New  York  City  holds 
this  point  of  view.  See  Hearings  before  the  New  York  Joint  Legislative  Committee 
on  Housing.  Record,  pp.  4598  - 4666. 


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170 

and  forward  such  list  to  the  secretary  before  a date  to  be  specified  by  vote  of 
1 

the  Association.”  Mr.  Eddy  criticized  this  provision  as  follows:  ”In  my 

opinion  the  law  does  not  permit  the  filing  of  price  lists  as  provided  in  this 

paragraph,  and  plans  along  these  lines  have  been  severely  criticized.  I know 

of  no  authority  which  permits  members  of  an  association  to  file  any  list  of  prices, 

2 

either  lowest  or  highest,  'at  which  he  cares  to  sell'”  Upon  the  receipt  of 
these  lists  the  plan  provided  tliat  the  secretary  should  make  up  a conwosite  list, 
stating  thereon  "the  lowest  conparative  prices  found  on  any  of  the  individual 

lists  submitted  to  him,  and  immediately  send  a copy  of  this  list  of  lowest  prices 

3 

to  each  member  of  the  Association.”  Mr.  Eddy  criticized  this  provision  as 
fol  ows:  "The  precise  duty  of  the  secretary  is  not  clearly  outlined  in  this 

paragraph  but,  as  warded,  the  paragraph  is  clearly  open  to  the  objection  that 

it  permits  the  issuance  of  a more  or  less  arbitrary  list  for  the  guidance  of  the 

4 

trade;  and  if  so,  such  practice  has  been  specifically  condemned  by  the  courts." 

Mr.  Eelix  H.  Levy,  former  Special  United  States  Government  Attorney, 
now  practicing  in.  New  York  City,  in  a speech  before  the  National  Pipe  and  Supplies 
Association,  held  at  New  York  City,  April  22,  1914,  gave  it  as  his  opinion  that 
the  interchange  of  price  lists  was  in  violation  of  the  Sherman  Act.  In  developing 
his  line  of  argument  he  cited  an  instance  where  a certain  association  of  manu- 
facturers of  machinery  devised  a plan  for  interchanging  price  lists  through  the 
medium  of  their  secretary,  the  purpose  being,  that  "if  a buyer  came  and  said  so 

and  so  is  quoting  a certain  price,  the  manufacturer  could  look  it  up  and  tell 

5 

whether  or  not  it  was  true."  The  existence  of  this  practice  - so  the  argument 


^‘Babson's  Reports  on  Cooperation,  C.  C - 10. 

^’Ibid. 

2- Ibid. 

Ibid. 

5. 

’Domestic  Eigineering,  Vol.  67.  llay  9,  1914,  p,  203. 


— xr^ . 


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171 


runs  - Implied  that  members  had  faith  in  the  veracity  of  the  reports  of  prices 
contained  in  these  price  lists.  The  mere  fact  of  the  presence  of  these  prices  in 
the  price  lists  constituted  no  proof  in  itself  of  their  aixthenticity,  unless 
members  were  in  some  kind  of  agreement  to  abide  by  them.  In  other  words  there 
was  present  an  element  constituting  a promise,  express  or  tacit,  to  the  effect 
that  members  would  "stick"  to  the  prices  nemed  in  their  price  lists.  This,  ac- 
cording to  the  e^osition  of  Mr.  Levy,  constituted  an  agreement  in  violation  of 

1 

the  Sherman  Anti- trust  x,aw. 

Even  the  most  staunch  supporters  of  open  price  associations  among 
attorneys  are  frank  to  admit  that  members  of  open  price  associations  are  strongly 
tempted  by  the  facilities  afforded  them  through  the  operation  of  the  open  price 
system  to  commit  acts  condemned  by  law.  Some  attorneys  regard  the  open  price 
plan  as  nothing  more  than  a subterfuge  for  effecting  agreements  to  enhance  prices. 
The  following  record  of  questions  and  answers  talcen  in  the  Hearing  before  the 
New  York  Legislative  Committee  on  Housing  is  illustrative  of  the  points,  first, 
that  staunch  defenders  of  the  plan  admit  that  it  readily  lends  Itself  to  abuse; 
second,  that  the  plan  is  regarded  as  a cloak  for  the  perpetration  of  illegal 
practices.  Mr.  Samuel  Untermyer  is  conducting  the  examination.  Mr.  Ylm.  J. 
I4athews  a former  associate  with  Mr.  Eddy  in  the  practice  of  law,  and  now  counsel 
for  several  open  price  associations  organized  by  Mr.  Eddy  is  on  the  witness 
stands 

Q.  Do  you  subscribe  to  this:  reading  from  Mr.  Eddy’s  book,  "New  Comr 

petition",  page  109  : "It  is  almost  needless  to  point  out"  - ' referring  to 

these  Associations  of  the  character  that  you  represent'  - "that  the  danger  ahead 
of  such  frank  and  friendly  cooperation  is  - as  the  law  now  stands  in  this  country 
- the  agreement  that  suppresses  competition." 

T. 

Ibid,  p.  203. 


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172 


"Given  an  association  in  any  trade  or  industry  cased  upon  the  single 

agreement  to  exchange  information,  there  would  he  the  temptation  for  groups  of 

memoers  to  agree  upon  their  hids,  to  apportion  work  and  so  secure  for  the  time 

being  arbitrarily  high  profits,  by  suppressing  competition."  You  agree  to  that  , 

don’t  you?  A.  Yes,  the  effect  of  thst  is  ...  . 

0.  That  that  is  the  temotation  of  these  associations?  A.  That  the 

1 

temptation  would  thereby  be  afforded.*  * * 

Q.  Reading  : "It  is  almost  as  common  to  hear  men  say,  'We  have  an 

association,  but  we  don't  agree  upon  prices.' 

"'What  do  you  do?' 

"'Why,  I get  up  and  say,  'My  price  is  so  and  so',  and  the  others  get 
up  and  say  their  prices  are  so  and  so. ' 

"'And  the  result  is,  the  price  of  everybody  is  'so  and  so'. 

"'Naturally,  but  we  don't  agree  they  shall  be,  we  just  exchange  views 
and  let  prices  take  care  of  themselves.'" 

Do  you  remember  that?  A.  Yes. 

Q.  Do  you  agree  that  that  can  be  done,  that  the  law  is  going  to  be 
whipped  arouad  the  st'omp  that  way?  A.  No,  Mr.  Untermyer  . . . 

Q.  Do  you  agree  to  that?  A.  To  the  effect  that  they  made  statements  as 
to  what  their  prices  had  been.  Beyond  that  I do  not  agree  that  they  can  state 
what  their  prices  will  be.  If  that  means  that  they  can  state  what  their  prices 
shall  be  I don't  agree  with  that. 

Q.  You  are  skating  on  pretty  thin  ice,  aren't  you,  on  that  proposition? 
A.  Sure,  it  is  a very  thin  line. 

Q.  Pretty  fine  line,  so  fine  it  disappears  when  you  look  at  it?  A. 

No,  it  doesn't. 

T. 

Ir^athews,  Wto.  J. , Record,  Hearings  before  the  New  York  Joint  Legislative 
Committee  on  Housing,  p.  4629. 


« A, 


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173 


Q.  Of  course  you  know  that  husinesa  men  do  not  travel  across  the  con- 
tinent in  order  to  tell  one  another  what  their  prices  have  been;  don't  you  know 
that?  Because  competitors  are  supposed  to  know  what  their  prices  have  heen? 

A.  They  don't  knov/  it  and  that's  one  of  the  puri:oses  of  this  society. 

Q.  You  think  that  competitors  in  these  great  industries  with  their 
swarms  of  salespeople  out,  one  man  doesn’t  know  what  the  other  man's  prices  are? 
A.  Sure;  they  find  it  out  very  quickly. 

Q.  So  they  don't  get  together  to  suggest  what  their  prices  are  or  have 

"been,  - they  get  together  to  suge:est  vdiat  their  prices  should  be?  A.  They  don't 

1 

do  tliat  in  any  of  our  societies.  * * * 

Q.  The  principle  of  the  Eddy  Plan  is  cooperation,  isn't  it?  A.  Yes, 
but  not  to  eliminate  corrpetion. 

Q.  You  are  of  the  opinion,  are  you,  that  there  can  be  cooperation, 
combiriation  aund  still  coirpetition,  are  you?  A.  Yes»  sir. 

Q.  It  doesn't  strike  you  that  those  are  absolutely  contradictory  terms, 
does  it?  A.  It  does  not.  i * * * 

0.  Don't  you  know  that  cooperation  between  competitors  is  unsafe  to 
the  public  unless  it  is  guarded  by  governmental  supervision  and  regulation,  so 
that  the  public  shall  not  be  taken  advantage  of;  don't  you  agree  to  that?  A.  I 
can  see  that  it  can  be  abused. 

Q.  Now,  then,  we  have  at  present  no  governmental  regulations  over 
competition,  have  we,  that  is  opposed  to  the  principle  of  the  present  economic 
system?  A.  Yes. 

Q.  Now,  in  the  absence  of  government  regulation  of  agreements  between 

competitors,  don't  you  see  the  peril  of  such  agreements  to  the  public  safety? 

A.  Oh,  sure. 

_ 

Ibid,  p.  4624. 


1 


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174 


Q.  Therefoi’e,  -until  we  get  government  regulation,  don't  you  see  that 

coopei-ation  among  cornpetitors  must  he  suppressed  for  -the  safety  of  the  public? 

1 

A.  No. 

Mr.  Gilbert  H.  Montague,  of  the  New  York  Bar,  and  co-unsel  for  defend- 
ants in  numerous  prosecutions  -under  anti-tiust  laws  also  has  emphasized  the 
danger  of  open  price  work  leading  to  violations  of  the  law.  Speaking  of  open 
price  associations  he  is  quoted  as  saying,  "So  long  as  its  members  enter  into 
no  agreement  to  fix  prices  or  control  competition,  some  say  the  legality  of 
such  an  association  can  hardly  be  questioned.  Probably  this  is  so,  but  “the 
question  will  remain,  how  far  removed  from  fixing  prices  and  controlling  com- 
petition are  the  res-ults  of  such  an  association?  It  is  a hair  line  that  divides 
many  trade  associations  from  admittedly  unlawful  combinations  in  restraint  of 
trade,  and  during  the  past  five  or  six  years  (this  stateir©nt  was  made  in  1920) 
there  has  been  an  increasing  laxity  on  -the  part  of  many  trade  association 
officials  and  some  of  the  lawyers  who  have  been  advising  regarding  the  proper 
limits  of  trade  association  activities.  Interchange  of  information,  while  al- 
ways dangerous  where  ever  prices  are  touched  upon,  would  seem  to  be  no  imposs- 
ible feat  for  trade  associations  lawfully  to  accomolish  provided  always  tliat 

2 ^ 

they  observe  proper  safeguards  and  precautions." 

The  Forest  Service  of  the  Department  of  Agriculture,  in  its  recent 
re-port  on  the  1-umber  industry,  concludes  that  the  open  price  system  is  suscep- 
tible of  abuse  at  the  hands  of  those  who  would  divert  its  activities  into  im- 
proper channels,  but  apparently  there  is  no  thought  that  open  price  activity 
mast  inevitably  lead  to  violations  of  the  law,  for,  although  "the  assembling  and 
distribution  of  prices  received  by  different  members  of  these  associations 

T. 

Ibid,  p.  4629. 

2. 

Printers  Ink,  June  24,  1920,  p.  44. 


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175 


obviooisly  forms  a possible  vehicle  or  mediiun  for  reaching  more  or  less  definite 
agreements  or  understandings  controlling  the  prices  at  which  luniber  is  offered, 
the  extent  to  which  they  may  serve  as  such  a medium  deoends  upon  the  policy 
followed  by  the  particular  association  as  to  the  degree  of  publicity  given  to 
data  of  this  character,  upon  the  efforts  which  the  association  may  make  to  in- 
duce its  members  to  price  their  product  in  conformity  with  the  highest  rates 
shown  by  the  current  reports,  and  upon  the  extent  to  which  the  individual  lumber 
producers  or  selling  organizations  may  use  the  data  as  a basis  for  price-control 
agreements  or  informal  Tonderstandings.  Properly  employed,  particularly  with  a 

large  degree  of  publicity,  such  information  should  serve  to  stabilize  the  lumber 

1 

market  to  the  advantage  of  both  producer  and  consumer.” 

In  the  face  of  the  statements  made  by  the  staunchest  supporters  of 
the  Open  price  plan,  tantamount  to  an  admission  that  the  interests  of  the  public 
may  all  too  easily  be  jeopardized  by  the  unrestrained  operation  of  such  a system, 
it  appears  that  unless  open  price  associations  are  to  be  forbidden  their  exist- 
ence, some  means  of  regulation  or  control  must  be  sought,  looking  toward  the 
end  of  confining  the  activities  of  these  associations  to  their  proper  channels. 
Before  considering  the  reuiedial  measures  that  have  been  proposed,  it  may  be  well 
to  give  particular  notice  to  some  of  the  more  common  methods  employed  by  so- 
called  open  price  associations  in  their  endeavor  to  unlawfully  maintain  or  en-  I 
nance  prices. 

ILLEGAL  ACTIVITIES  AND  SUGGESTED  EEffiDIES 

In  the  attempt  to  maintain  or  enhance  prices  by  means  of  concerted 
action,  reports  pertaining  particularly  to  production,  shipments,  stocks,  costs 
and  prices  play  an  important  part,  for  they  serve  to  illuminate  the  competitive 

^Deport  of  the  Forest  Service  of  the  U.  S.  Department  of  Agriculture  on  T irnber 
Depletion,  Lumber  Prices,  Lumber  Exports,  and  Concentration  of  Timber  Ownership 
June  1,  1920,  p.  68. 


f^r;  ^ 'Xvi  ;•  70  ^.[;:r:i:>v 

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176 


situation  in  snch  a way  as  to  malce  clear  the  course  of  action  that  should  he 
adopted  in  order  to  accomplish  the  object  in  view.  If  it  is  thought  desirable 
to  seek  to  achieve  the  end  in  view  indirectly  by  curtailing  production,  a oar- 
ticular  study  is  made  of  production,  order  and  stock  reports.  After  learning 
the  conditions  of  supply  and  demand  therefrom,  it  becaaes  pogsible  to  deter- 
ndne  approximately  the  percentage  of  curtailment  that  is  necessary  to  net  members 
the  ma>:imum  profit.  In  the  case  of  the  Yellow  Pine  Association  reports  of  this 
character  were  made  the  basis  for  determining  the  percentage  of  curtailment. 
Action  to  curtail  was  decided  upon  by  resolution.  Not  only  v/ere  the  reports 
used  for  the  purpose  of  determining  the  percentage  of  curtailment  but  the  sec- 
retary used  them  after  the  resolution  to  curtail  had  been  passed  to  determine 

1 

whether  members  were  complying  or  not. 

The  use  of  cost  information  as  a basis  for  enhancing  prices  in  con- 
cert is  often  resorted  to  because  the  circuitous  method  involved  in  this  pro- 
cedure is  helpful  in  camouflaging  from  the  gaze  of  the  public  the  true  char- 
acter of  the  activity  engaged  in.  Incrimination  is  therefore  less  likely  to 
result  than  if  some  more  direct  means  vyeve  used.  In  its  report  on  the  ’’Causes 
of  High  Prices  of  Farm  Im-oleraents,  ”llay  4,  1S20,  the  Federal  Trade  Comrrission 
exriosed  the  practice  in  vogue  among  the  associations  of  implement  manufacturers 
of  peiverting  the  study  of  costs  to  the  end  of  controlling  prices.  In  effect 
what  v/as  done  v/as  to  have  cost  ccjrqparison  meetings  at  which  inflated  costs  were 
compared  with  the  tacit  understanding  that  priceswould  be  advanced  tho  same 
percentage  shorn  by  the  inflated  costs.  The  standardization  of  implements,  and 
the  equix^ment  that  was  furnished  therewith,  was  pushed  with  energy  because  by 
means  of  this  achievement  not  only  prices  but  also  costs  could  be  made  comparable. 

1. 

State  vs.  Arkansas  Lumber  Co.,  et  al,  16S  S.  W.  p.  ISO. 


177 

With  some  degree  of  standardization  accomplished,  cost  committees  could  proceed 

to  arrange  a cost  schedule,  assigning  arbitrary  inflated  costs  to  each  kind  of 

implement  and  equipment,  these  having  no  necessary  relation  to  actual  costs, 

hut  serving  as  a basis  for  "recommendations"  to  members  that  the  percentage  of 

increase  in  costs  would  justify  a like  advance  in  prices.  There  appeared  to 

be  no  direct  price  agreements;  no  doubt  it  was  appreciated  that  there  lay  less 

risk  of  detection  in  controlling  prices  through  cost  education.  As  the  report 

of  the  Federal  Trade  Commission  states,  the  "connection  between  cost  study  and 

prices  of  memoers  was  one  of  subtle  group  suggestion  and  unity  of  group  opinion 

created  at  meetings  rather  than  one  of  direct  nrice  agreement  or  other  formal 

l‘ 

action  taken  to  influence  prices  of  members.  " Eeports  of  prices  submitted  by 
members  were  used  to  check  up  their  activities  to  see  whether  they  were  follow- 
ing the  course  indicated  by  cost  study.  It  is  apparent  that  the  cost  work  done 
by  these  associations  was  not  for  the  legitimate  purpose  of  educating  members 
in  proper  methods  of  cost  keeping  so  as  to  make  it  possible  for  them  to  ascer- 
tain their  actual  costs,  but  the  purpose  clearly  was  to  encourage  memibers  to 

, . 2 
advance  prices  by  disseminating  among  them  studies  of  inflated  costs. 

There  remain  to  oe  discussed  the  various  legal  abuses  attending  the 
exchange  of  price  information.  The  exchange  of  price  Information  may  take  the 
form  of  correspondence  and  conversations  indicating  prices  to  be  charged  or  it 
may  be  confined  to  past  prices.  Itost  so-called  open  price  associations  have 
been  ratlaer  circumspect  about  exchanging  information  of  future  prices,  because 


1.  ^ - 

Beport  of  the  Federal  Trade  Commission  on  the  Causes  of  High  Prices  of  Farm 
Implements,  l,Iay  4,  1920,  p.  427. 

2. 

Accounts  of  the  cost  activities  of  the  farm  irr^^lement  manufacturers'  associa- 
tion may  be  found  on  page5308,  309,  318,  414,  459,  460,  526,  584-587,  in  the 
Beport  of  the  Federal  Trade  Commission  on  the  Causes  of  High  Prices  of  Faim 
Implements,  I^y  4,  1920. 


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■ ''? 

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tl  “XC  .'■*"’  ^'t.  r--,'  C'rf  - -•>  - .i;f  j-4ft3i , .'Oirftc-. ; .-.-c;  ,'fUt  y. . 


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A'£TDX^  *8*1^’:  't'>i.'.Z'.y  "1  . \.I  ..ii 

•<:-:  ri  : ,a=j'  . - 

looii  ; ic  !M  ..  vij  .-o  raJitviL. 


.J  .c  /x  .;.,:  ;.^r  j; 

.':»4  l3  < r*or,  .“oc-^  • 'S 

^ i --*^  I - '■-  ( 'v  -c  .■  yiv/ 1”  j' 


tiii  -.?-f  90*  III 

.’  ,.  \x:^  ' , r-  i 


178 


it  has  been  generally  helieved  the  courts  would  look  upon  activity  of  this  char- 
acter as  almost  prima  facie  evidence  of  an  agreement  to  enliance  or  fix  prices. 
However,  manufacturers  of  implements  have  "been  exchanging  such  information  among 
themselves,  hut  they  have  been  careful  not  to  involve  their  associations  as  such, 
in  this  activity.  The  following  letter  of  F.  G-.  Allen,  General  I.fenager  of  the 
Moline  Plow  7/orks,  to  W.  B.  Brinton,  President  of  the  Grand  Detour  Plow  Co., 
September  17,  1915,  is  illustrative  of  their  methods: 

’"It  has  been  our  intention  since  the  Bloomington  Tractor  demonstra- 
tion to  raise  the  price  of  our  tractor  clow.  Y/e  made  a price  on  our  ulow  which 
seemed  to  us  to  net  a legitinate  profit,  and  find  that  to  are  below  the  other 
people  who  are  making  this  class  of  goods,  and  are  dis;posedto  get  all  we  can 
for  our  goods,  even  though  the  price  we  are  making  nets  us  an  adequate  profit. 
*****  We  could  not  see  hew  they  could  have  the  courage  to  demand  so  large 

a profit,  but  to  assure  you  that  it  is  our  intention  of  raising  urices  just  as 

1 

soon  as  we  can  get  to  it,  and  that  to  think  will  be  within  a few  days.” 

Prostitution  of  the  system  of  reporting  past  prices  to  the  end  of 
maintaining  or  enhancing  prices  is  most  commonly  achieved,  first,  by  members, 
in  their  individual  capacity  or  through  their  association  leaders,  urging  each 
other  to  strive  toward  the  accomplishment  of  these  objects;  second,  by  the  acts 
of  association  officers  in  disseminating  data  with  the  purpose  of  influencing 
members  to  direct  their  energies  toward  this  result. 

If  dissemination  of  price  data  is  decided  upon,  the  central  office  may 
choose  the  method  of  withholding  some  of  the  price  information  received  from 
members,  disseminating  only  that  which  will  seem  to  indicate  that  going  prices 


1. 

Ibid,  p.  343. 


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179 


are  higher  than  they  really  are,  or  the  method  may  he  adopted  of  issuing  to  the 
memhership,  "suggested"  lists  of  prices  purporting  to  reflect  the  character  of 
going  prices,  hut  in  reality  being  "boosting"  prices.  Most  of  the  lumber  associ- 
ations liave  resorted  to  both  methods.  In  the  case  of  the  Yellow  Pine  Associa- 
tion, the  secretary  assemoled  reports  of  all  prices  charged  by  members,  but  he 

compiled  and  disseminated  only  those  which  reflected  the  highest  prices  secured. 

1 " 

This  was  characterized  by  the  court  as  a price  boosting  device.  The  American 

xiardwood  I.^anuf'acturers*  Association  also  adopted  the  same  scheme  but  very  soon 

2 I 

abandoned  it  on  the  advise  of  counsel.  Mr.  L.  C.  Boyle,  attorney  for  this  asso- 
ciation, upon  being  questioned  regarding  the  legality  of  the  practice,  replied 
in  part : 

It  is  Biy  judgment  that  it  is  "cnwise,  especially  at  this  time  to  cir- 
cularize this  form  Oi.  market  report  of  high  sales  and  this  because  the  conclusion 

is  i-iaole  to  be  reached  tliat  the  high  ueaks  are  desisnedly  given  for  the  'oiiip'Ose 

3 

of  forcing  up  the  general  market. " 

It  has  been  suggested  earlier  in  this  chapter  that  in  some  quarters  it 
is  considered  illegal  to  interchange  list®  of  prices  actually  being  quoted  by 
memcers;  however  this  my  be,  the  illegality  of  distributing  "suggested"  price 
lists  is  unquestioned.  This  device  has  been  very  commonly  used  in  the  lumber  | 
industry  in  the  effort  to  maintain  or  enhance  prices.  A description  of  this 

4 I 

practice  has  been  given  elsewhere.  I 


1. 

See  account  given  in  chapter  seven,  pp.  132-137. 

Gadd,  F.  E. , Eecord,  American  Col.  & Lumber  Co.,  vs.  U.  S.  Vol.  2,  o-  1110. 

3 • 

Gadd  E;diib.  "S",  Eecord,  Vol.  2,  n.  1242. 

4. 


o,  . ^ > La:  'm9*i  ' . 


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180 


By  the  Interchange  of  inforimtion  pertaining  to  past  prices  officers 
and  members  alike  may  learn  to  what  extent  fellow-members  are  adhering  to  sach 
arrangements,  \mder standings  or  agreements  as  may  be  in  force.  Being  possessed 
of  this  knowledge,  they  can  use  it  as  a basis  for  bringing  pressure  to  bear  on 
those  who  seem  to  be  out  of  line  with  the  general  policy  of  the  association. 

It  is  no  longer  c\istomary  to  exact  hard  and  fast  agreements  calling  for  penalties 
in  the  event  of  violations  thereof;  exhortations,  recommendations  and  resolutions 
have  taken  their  place.  Little  trace  of  compulsion  exists.  Unity  of  opinion 
developed  at  meetings  and  by  means  of  correspondence  is  relied  upon  to  carry  out 
recommendations  made  and  resolutions  nassed. 

1 

To  illustrate:  in  an  investigation  of  the  bock-paper  industry  the 

Federal  Trade  Commission  fo^^nd  that,  while  ostensibly  the  duties  of  the  secre- 
tary of  the  statistical  bureau  to  vhlch  moat  of  the  manufacturers  belonged  was 
to  corrp)ile  and  distribute  certain  statistical  information,  in  reality  he  was 
principally  engaged  in  inciting  members  to  increase  their  prices,  this  being 

done  by  correspondence,  use  of  the  telephone  and  telegraph,  attending  meetings, 

2 

and  holding  personal  conferences  with  members. 

In  the  farm  inclement  industry  members  often  took  it  upon  themselves  to 
give  notice  to  fellow-members  when  their  prices  were  found  to  be  out  of  line  with 
those  *' re  commended”  by  committees.  On  January  19,  1917,  C.  S.  Brantingham, 
president  of  Bmmer son- Brantingham  Co.,  wrote  to  one  of  his  sales  managers  as 
follows: 

”’I.ly  attention  has  been  called  by  a competitor  to  the  fact  that  our 
recent  instructions  sent  out  to  branches  and  competitors  show  sulky  |>lows  with 

T. 

Report  of  the  Federal  Trade  Commission  of  the  Book  Paper  Industry,  pursuant 
to  Senate  Resolution  Uo.  122,  dated  August  15,  1917. 

2. 

Ibid,  p.  17. 


IXJ 


V - : 

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7;  4 i>CCg.ft  , 


181 


an  advance  of  fifteen  per  cent  instead  of  ten  per  cent  as  was  arranged.  You 

can  perhaps  imagine  my  humiliation  in  getting  this  information  from  this  source, 

inasmuch  as  they  have  before  this  called  my  attention  to  errors  in  getting  out 

1 

our  price  instru-Ctions.  " 

The  issuance  of  "recoranendations”  by  committees  of  members  is  a common 
device  for  working  up  a unified  sentiment  that  may  be  counted  upon  to  crystalize 
into  price  maintenance  or  price  enhancement  activity.  This  practice  has  been 
particularly  prevalent  in  the  lumber  industry.  For  instance,  in  its  report  be- 
fore the  Fall  Mseting  (1914)  of  the  Michigan  Hardwood  lifenufacturers'  Association, 
the  Market  Conditions  Committee  stated  in  part: 

”'Ybur  committee  has  carefully  studied  all  recent  sales  as  reported 
to  your  secretary  and  the  attached  price  list  is  their  best  judgment  as  to  pres- 
ent prices.  We  want  you  to  study  more  carefully  than  you  have  heretofore  statist- 
ics as  to  stock  as  prepared  by  your  secretary.  If  you  will  study  them  carefully  , 
we  feel  sure  that  each  and  everyone  of  you  will  decide  to  curtail  your  production 
all  you  possibly  can  and  then  some." 

Not  only  have  recomaendations  and  resolutions  been  used  for  the  purpose 
of  exerting  a direct  effect  on  price  policy,  but  they  have  been  used  for  the  pur- 
pose of  affecting  the  price  policy  of  members  indirectly  through  regulation  of 
terms  of  payment.  It  is  the  writer's  observation  that  nearly  every  trade  associ- 
ation in  the  textile  and  lumber  industries  advocates  standardization  of  tenas. 

The  Eddy  associations  appear  not  to  countenance  this  form  of  activity.  The  Eab- 
son  Statistical  Organization  once  quoted  to  IJr.  Eddy  the  opinion  of  a correspond- 
ent that  terns  of  payment  might  properly  be  put  upon  a standard  basis  and  asked 

1. 

Heport  of  the  Federal  Trade  Comruission  on  the  Cause  of  High  Prices  of  Farm 
Implements,  4,  1920,  p.  312. 

2. 

American  Lumberman,  Oct.  24,  1914,  p.  42. 


ct:J 


• C' .. 


'•f '■ 


' ■i:  i'  T.  ,r-  •,  ■ 

• - . - Vici  -•  ; U-i’.  ^ ^ 


r^fsor  j»  ■>  / , 1*  , 


182 


Mr.  Eddy  to  conm-jent  on  this  point  of  view.  llr.  Eddy  replied  in  part: 

"It  seems  to  be  the  opinion  of  your  correspondent  that  v/hile  men  may 
not  advance  prices  directly,  they  may  do  so  indirectly  by  shortening  the  terms  of 
payment,  etc.  It  is  needless  to  say  that  all  such  attempts  to  control  the  free- 
dom of  the  individual  to  ru.n  liis  business  as  he  pleases,  are  contrary,  not  only 
to  the  Shern;an  Lav;,  but  to  the  laws  of  practically  every  state  in  the  Union,  and 
no  open  price  association  is  permitted  to  do  anything  of  the  kind,  except  with 

the  cooperation  and  consent  of  customers  obtained  in  advance  of  the  adoption  of 

1 

the  nsv;  regulations. " 

The  foregoing  discussion,  it  is  thought,  makes  clear  without  further 

demonstration  tliat  open  price  associations,  or  any  other  trade  association  for 

tliat  matter,  can  all  too  easily  extend  their  activities  to  the  point  where  they 

become  a detriment  to  the  public  welfare.  The  Federal  Trade  Corariission,  as  a 

res’ult  of  its  investigations  of  numerous  trade  associations,  concludes  that  "such 

associations  are  freq;uently  tempted  to  extend  their  activities  beyond  the  useful 

function  of  collecting  trade  information  regarding  supply  and  demand  and  prices, 

and  to  engage  in  activities  tending  to  artificially  control  prices  and  the 

2 

channels  of  distribution."  It  is  generally  recognized  that  the  present  law  en- 
forcement jpoachinery  is  inadequate  to  prevent  lawless  trade  association  bodies 
from  consnitting  abuses.  Proposals  for  remedies  have  been  made,  but  they  are 
general  and  superficial  in  ciiaracter,  - just  wliat  one  mi^t  expect,  considering  the 
newness  of  the  problem.  The  chief  remedies  proposed  iiave  been  along  the  lines 
of  greater  pxxblicity  and  more  governmental  super'/ision.  A combination  of  these 
is  advocated  by  Ivir.  Samuel  Untermyer,  New  Tork  attorney; 

"’The  real  v;ay  of  preventing  injury  from  these  combinations' " he  is 
qp.oted  as  saying,  "'is  to  submect  them  to  publicity,  and  all  their  acts  to  rigid 

^’Babson,  E.  W. , Eeports  on  Cooperation,  C.  C.  - S. 

2. 

Qpotation  in  American  Lumberman,  Dec.  22,  1917  from  Annual  Eeport  of  the 
Federal  Trade  Coran-lsslon  for  the  Fiscal  Year  ended  June  30,  1517,  p.  31. 


- i.  ^ r; 


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183 


1 

governmental  supervision.’"  His  plan  for  controlling  their  activities  hy  means 
of  a State  Trade  Comrrission  is  the  most  concrete  proposal  for  a remedy  yet  pre- 
sented. The  chief  points  called  for  hy  this  plan  may  he  briefly  suosirarized  as 
follows: 

1.  Creation  of  a State  hi-partizan  Trade  Commission  of  six  members. 

2.  Bequire  every  trade  organization  that  is  subject  to  the  jurisdiction 
of  the  State  to  file  with  the  commission  a copy  of  its  charter  and  by-laws,  with 
the  names  of  its  officers,  directors,  and  members. 

3.  Require  all  those  engaged  in  business  in  the  State  to  file  a report 
with  the  ccsrrnissicn  disclosing  all  trade  associations  of  which  they  are  members, 
and  any  "agreement,  arrangement  or  understanding,  whether  written  or  oral"  with 
any  one  else  engaged  in  a similar  line  of  business. 

4.  Prohibit  those  who  do  not  meke  proper  disclosures  from  remaining 
aif filiated  with  any  trade  associations. 

5.  Permit  members  to  participate  in  agreements,  arrangements  or  under- 
standings intended  to  regulate  or  affect  or  fix  prices,  or  output,  or  the  divis- 
ions or  firoportionnxent  of  territory,  or  the  "reporting  or  excliange  of  cost  prices, 
or  the  names  of  customers,  or  reports  of  sales,  or  that  otherwise  deal  with  a 
subject  that  tends  or  is  intended  to  regulate  or  restrain  coim^etition,  " provided 
"such  agreement,  or  understanding,  whether  v;ritten  or  oral,  shall  have  first 
been  submitted  to  the  comniission  and  apuroved  by  it.  " 

6.  Hb  agreements,  arrangements  or  understandings  are  to  be  approved 
by  the  commission  "unless  or  until  the  ccmmission  shall  have  approved  the  prices 
at  which  commodities  are  to  be  s old  which  may  not  permit  of  a profit  beyond 
that  which  the  commission  deems  to  be  reasonable,  nor  unless  all  the  terms  and 
details  have  been  exposed  to  the  conmission  and  have  been  approved  by  it." 

T.  ~ 


The  world.  Sept.  15,  1920, 


184 


7.  Failure  on  the  part  of  inembers  who  are  parties  to  agreements, 
arrangements,  or  understandings  to  comply  with  the  provisions  as  above  outlined 
shall  makre  them  gailty  of  a misdemeanor  and  upon  conviction  they  shall  be  punished 
etc. 

8.  The  Trade  Commission  shall  have  the  same  powers  of  supervision  and 

visitation,  etc.  "as  are  now  possessed  by  the  Federal  Trad.e  Commission  with  respect 

1 

to  interstate  corporations." 

Mr.  E.  H.  Gaunt,  a prominent  secretary  of  several  open  price  associa- 
tions, favors  legislation  that  would  give  the  Federal  Trade  Commission  power  to 
permit  trade  associations  to  fix  the  price  of  articles  sold  by  their  members, 
this  price  to  be  a fair  one  based  on  accurate  costs.  "This  could  be  done,  " says 
Mr.  Gaunt,  "in  the  same  mamaer  as  the  Public  Service  Commissions  of  various 
States  control  the  price  of  gas,'  electric  lights,  railroad  rates,  and  street-car 

fares  by  requiring  trade  associations  to  file  with  the  Federal  Trade  Commission 

2 

their  proposed  changes  in  prices." 

The  policy  of  price  fixation  involved  in  both  Mr.  Untermyer's  plan 

and  that  of  Mr.  Gaunt  has  its  obvious  drawbacks.  To  review  the  arguments  for 

andagainst  this  feature  would  extend  the  scope  of  this  chapter  unduly.  Suffice 

it  to  say,  that  many  economists  of  eminence  as  well  as  prominent  men  in  other 

professions  hold  that  price  fixing  under  control  of  Government  commissions  is 

not  desirable.  Perliaps  their  leading  argument  is  that  such  a course  has  the 

effect  of  checking  technical  development,  because  with  prices  fixed,  incentive 

to  inprove  processes  with  a view  of  increasing  business  by  lowering  prices  below 

3 

those  of  competitors  is  diminished.  A study  of  war  experiences  with  Government 

T. 

For  a more  detailed  account  of  the  Untermyer  Plan,  see  The  World.  New  York 
City,  Sept.  15,  1920. 

2.  _ 

^ Gaunt,  E.  H. , Cooperative  Competition,  Providence,  R.  I.,  Jan.,  1918,  p.  32 

Clark,  J,  B.,  The  Possibility  of  Competition  in  Corar.erce  and  Industry,  Annals 
of  the  Anerican  Academy  of  Political  and  Social  Science,  Vol.  42,  No.  131,  p.  63. 


‘ .''Tfj-  : l~i  :z£-r  &.'}  yt/'ij.  » . ' 

r.t  c*  .. ’•**!/ :■“?■  oi  ovcr.ftri£^e*^r,'-n"  •?-■'■  rr^-i^ 

p:.  i u' ''i.  r.:-.c.'  >n%  -ir^. ’i'.';  */^5 


\ 


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/ * 

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• •.  ■ 1 - •■ 

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185 


186 


thinks  tlaat  the  activities  of  trade  associations  can  he  safegtoarded  hy  the  coop- 
eration and  control  of  a re  sponsible  public  agency  like  the  Federal  Trade  Comm- 
ission,  and  by  systematic  publicity.  In  its  annual  report  for  the  year  1917, 

the  Federal  Trade  Commission  recommends  that  "all  trade  association  files  should 

2 

be  made  x->'dblic  records."  "Such  publicity,  " declares  the  commission  "would  ex- 
tend the  knowledge  of  all  producers  and  consumers  regarding  conditions  of  supply 
and  demand  and  help  to  prevent  abnormal  trade  fluctuations  in  supply  and  prices. 

3 

It  wou].d  also  tend  to  curb  association  activities  of  an  objectionable  character.  " 
Neither  the  Forest  Service  Bureau  nor  the  Federal  Trade  Commission  has 
done  more  than  suggest  the  direction  in  which  to  seek  a remedy.  In  ether  words 
the  suggestion  is  not  accompanied  by  a working  plan.  It  is  believed  that  a 
study  of  the  possible  means  for  putting  into  practice  this  plan  of  publicity 
will  reveal  some  very  knotty  problems  to  be  overcome  before  the  plan  can  be  put 
into  operation.  Our  study,  thus  far,  has  revealed  that  membership  in  even  the 
most  successful  associations  represents  only  a moderate  proportion  of  the  persons 
who  are  elegible  to  membership.  The  inducement  to  membersliip  is,  first,  that 
the  association  is  a benefit  to  the  industry  as  a whole;  second,  that  the  associ- 
ation is  in  a direct  and  personal  way,  of  benefit  to  the  individual  members. 

It  goes  without  saying  that  usually  the  second  inducement  must  be  strongly 
, present  in  order  to  impress  prospective  members  sufficiently  to  cause  them  to 
join.  The  average  association  member  has  joined  because  of  the  belief  that 
by  so  doing  he  can  acquire  valuable  Information  that  would  otherv^ise  not  be 
accessible  to  him.  But  suppose  that  the  association  recordsviere,  as  contem- 
plated in  the  plan  of  the  Federal  Trade  Commission,  made  freely  open  to  the 

^’This  report  refers  more  particularly  to  trade  associations  in  the  lunher  in- 
dustry. See  Report  of  the  Forest  Seiwice,  Soma  Public  and  Economic  aspects  of 
the  Lumber  Industry,  June  24,  1917;  G-add  E>kib.  "A",  Record  American  Column 
Sc  Lumber  Co.  Ys.  U.  S.  Vol.  2,  p.  1198. 

2. 

Quoted  in  American  Lumberman,  Dec.  22,  1917,  p.  26. 

3*  ^ 

Ibid. 


‘v*“ ’DOti.i  1J-  '.o  ff a/,‘ ‘ . 1 -ic ...j 
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'0<i®4;il  r.>??  ,c.;  .iJ:-'. 

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<•■■>'■  yrt'. ix  * fitf 
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187 


■ 

public,  would  not  that  take  away  the  chief  incentive  that  members  have  for  join- 
ing? Why  pay  out  material  sums  to  cover  the  expense  of  collecting  and  dissemin- 
ating these  facts  when  non-members  may  secure  them  without  contributing  anything? 
It  is  manifest  that  the  suggestion  of  the  Forest  Service  and  the  Federal  Trade 
Commission  would  have  to  be  accompanied  by  provisions  that  would  maka  their  plan 
of  publicity  workable  and  equitable. 

It  Is  thought  that  trade  associations  honestly  endeavoring  to  operate 
along  legitimate  lines  would  find  it  distinctly  to  their  advantage  t o take  the 
initiative,  themselves,  inadmitting  the  public  to  a share  of  the  results  of  the 
knowledge  which  they  are  pooling,  phe  statistics  published  might  be  of  such  a 
character  as  t o be  instructive  to  the  public  and  yet  not  disclose  information  of 
more  particular  value  to  members  themselves,  thereby  preserving,  perhaps^ the 
incentive  that  under  the  present  arrangement  of  things  seems  to  be  needed  to  in- 
duce membership.  The  statistics  made  public  might  relate  to  the  industry  as  a 
whole,  showing,  for  instance^the  character  and  amount  of  annual  output;  the  per- 
centage of  fluctuation  in  amounts  on  hand  from  year  to  year;  the  relation  of 
prices  to  cost  of  production;  and  of  profit  to  capital.  Sketches  of  any  develop- 
ments in  the  industry  such  as  amalgamations,  new  issues  of  capital,  changes  in  I 
directorates,  et  cetera^could  also  very  well  be  made  public. 

A policy  of  frankness,  such  as  a step  of  this  kind  would  entail,  might 
help  trade  associations  to  break  down  the  prejudice,  suspicion,  and  distrust 
to  which  the  public  in  a large  degree  makes  them  the  object,  and  which  is  reflect- 
ed to  their  disadvantage,  in  hostile  government  action.  With  adequate  data  at 
their  disposal,  the  public  could  in  a large  measure  arrive  at  their  own  conclusionj 
regarding  the  reasonableness  of  prices,  wages,  profits,  et  cetera.  Many  unfoimded 
and  exagerated  suspicions  would  be  dispelled  thereby,  and  many  allegations  of 
profiteering  or  exploiting  now  blindly  hurled  at  the  undeserving  as  well  as  the 


.v  x crl7  - -.t '>  ■ I 

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h 


A ^ ^ t 

,^rJyto  r’  v.-fe*'«5-'4  ,ft«f*  ^ ’ f; 

, • «*eMo«  „oa  I 

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' •*<>>  ,«.fo^^ 

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'.orr.  vTi  ie  .*  »?.,>'  . >ji...o5  oi  jiloiij  lo  i™  ao'jootoiiT  lo  • 

M .^.-*.0  .X..XCOO  10  ■ ,,,  ’ 

. -=l.oosi0«o.  ea<f~^,  W„aitri  W.)  at  ,ta^ 

. , _ ' . , ^ ^ -4 oieo  ;to 

-S*—  x;'.*  te  X»X*.’c.?  5ft Asi  iifti  *A  vak4-.  .■ 

••  .-“SOSCOTl  lo  X0,ixog  i 

♦ ftxTfeii  Al" 

..  . " ' ,'  Z,  " * " •oo«*loo.£  qrarf 

- ^ - '■-*“^  ^ 3iXcfrq  sxC^  cofrfr  oj 

rftir  jWrrav,.-5 

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■ ■ - * .-r.*  .«0.ixT  50  ..8.-:oXco>oo..„  0-,  j 

■o.roiX^,rr.v^,,,^  t.U^m  ^ t:a«.  .aoioi  ^ 

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'ft 


»• 


i I4i^ 


188 


deserving  would  fall  of  tliSir  own  weight.  The  educating  effect  on  the  consumer, 

investor,  legislature  and  ’basiness  man  would  itself  he  helpful  to  the  tradeasso~ 

ciations  ttemselves  as  well  as  to  the  recipients  of  this  education;  in  the  course 

of  time  these  various  groups  would  come  to  understand  the  possibilities  involved 

1 

in  helpful  cooperation. 

Trade  associations  engaged  in  illegitimate  trad.e  practices,  which  now 
find  it  possible  to  thrive  unmolested  because  of  the  prevailing  state  of  public 
ignorance  of  their  operations,  would  undoubtedly  be  obliged  to  refom  were  the 
glaring  searchlight  of  publicity  turned  upon  them. 

The  rise  of  trade  associations  may  itself  be  taken  as  evidence  that 
the  policy  of  secrecy  in  business  is  being  rapidly  exploded.  Open  price  associa- 
tions go  further  in  sanctioning  publicity  than  do  other  trade  associations, 
but  even  they  show  a disposition  to  confine  the  information  at  their  disposal 
to  their  own  memberw.  It  is  believed  that  in  the  futtire  the  public  will  insist 
on  sharing  the  benefit  of  the  knowledge  that  is  being  pooled  by  these  associa- 
tions. Certainly  in  their  capacity  of  purchasers,  the  public  will  be  at  a 
relative  disadvantage  unless  they  possess  knowledge  of  market  conditions  equiv- 
alent to  that  possessed  by  members  in  their  capacity  of  sellers.  However  if  the 
public  are  to  insist  on  having  the  benefit  of  this  accumulated  laiowledge  they 
must  not  demure  at  sharing  the  expense  which  is  necessarily  associated  with 
gathering,  compiling  and  disseminating  information. 

ATTITUDE  OF  THE  FEDEEAE  GOVEMiffiHT 

It  is  the  writer's  conviction  that  trade  associations  would  be  less 
secretive  with  reference  to  their  activities  if  they  had  some  assurance  that  by 

T,  ' 


The  gist  of  Ms  line  of  argument  is  taken  from  an  article,  entitled.  Trade 
Combinations,  by  C.  Ernest  Fayle,  appearing  in  the  Edinbu.rgh  Beview,  July,  1919. 


I - 


■ 1,-^ac  C‘^is  •- c'^^e 'ts/.i.-jas,  ' 'uisw  'io  fSjtJ  :) 

t-x*  ;:i:?  O?  Ir'l*  I :>;;  J&lBOw  4«a.-^i«jEnJ  2s«e' h-ei 

'i?oo  ai  ; • iviffr' *io  r ;'5 .' :.  io--'i  «5vf^  oi  feja  w la  aV‘YX®ea«B; 

.'•-*-'.T.i  f44iii '_v- iiico  f?.--c  o*  V-'j:.  i.v.'cv.  otroi*»av  io 

‘.  ' , 

o.>,  ioldxK  i.*;  . o’*.;- »- r-j-s 'x  f -2  ^©gj^j|C»  ‘aioo  ct.^xT 

? ^ V > a .*^^’12^^;--.  V i.-  Q-:riT“!#'i^^  <-Z .“ ^p«C':••  ri  tai* 

:/.?  trz  m arro^sy  .<i  ' “.•  x ■ .x.‘  ,5  \-ct;4B*i©vO  l;o  ^ 2 

>a3ri-  ar/,c.-  b*».'n  '3  V-  .^'.-jil^xaw  , i iujiiri 

Ci:-:  3.:-&'iT«  SA  o’  \ai;  crr^ ”.;£^ 

irsB.:  . z^  a.i  L’a»c*:jw/cf  xxL  "ro  efi? 

,aa:  JcaloOf-aria  s;_-y;-'  mrlito  ot  nrci^*  j Cdjsq  ;:axrto/)^fawi  «i  aarfjfi  '7^  03  '?ri'-2:? 

I4acr'''  i6  Tiudd  iA  ftoi^Ksnolrl  *d?  >.  l^o  o r noi#-^G6^;  12)  a wd  Tjoui.:  -oyo*  ^ 

■eic.ii  ii  n'iXc';?;  4idj  c ; / .'  ^siS  >'*'p»jM*5  ti  esKC 

*i:looasiJ  «*ci^  \d  i^Iooc  uu&<.  i.l  V.ivlwcrri  f<i?  'artiiAis  f||0 

A “A  f/iv  Dil.frac7  LxfJ  .A*:©* -/  "H. ’:  '■".O  vj^^AqfliO  *:  .taol* 

• ^ 

▼ .’rf:  oijiimo  >0  A^J^aXtso:'  : saMf^c  ^ctd!t  fcaelxc  o>^:^rt£r£i*a*Jfc  avl^jJ’c'x 

^ *i  'i->v?VfO'’’  .-TAiXaa  'i^  ••xoicra:  yi'  .Via68*r0<r' Ja'Tj'  Llfhtft 

#1;::^  lo  3X1. ■'?>':  en^'  :vni\-»i£  rto  ^aia/rl.  ^iX?Xir: 

fylvt  i.  'yljfteaaeoiiii  ai  aoicfw  •fuafl'Tx-  rfKX  ii;l*xArJa  sir;  -AJb  ?On 

. iiettAaifti^Ea  2i  ,x;ius  V‘-^  ’ „ 

Tmr^m[tx.  .lai’rm-A 


CP.9I  t-,  i''iKr^  ^4Xooa!i2fiJEi£-'rrf  acl^tXvfjOD  « *ia  *iT9T «X  Jl 

, ‘ ' ».,  **■ 
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1 


, nZ  ii  i:iz 

<St  ,'Jir.  ,»./v=?i  ; 


.!  >wi-*:A  njA  r.-.’xt  ataiet  t.1  irM-.a,:'^’!^  \c  e .:iX  sii'  "io  *t- ?'•  .-'vi 

^*.  -2,' /■,■“•'•'' ? x-3i  gnitArqqa  .Li  ",3:..:-.'  . ' 


*fv^***‘ 


189 

doing  things  paiblicly  they  would  not  he  laying  themselves  open  to  attacks  hy  the 
Goremcent.  In  other  words  many  associations  have  sought  cover  because  of  the 
hostility  shown  them  in  the  past.  The  misdeeds  of  some  trade  Associations  have 
resulted  in  enveloping  all,  good  or  bad,  in  a s torm  of  public  and  governmental 
disapproval. 

The  conception  has  prevailed  in  governmental  circles  that  the  only 
true  competitionis  competition  carried  on  in  secret  and  in  ignorance.  Thus  trade 
associations  have  been  shown  hostility  because  they  have  tried  to  make  their  mem- 
bers intelligent  competitors.  The  point  of  view  that  business  men  should  comnete 
in  ignorance  is  well  illustrated  by  the  tenor  of  the  questions  put  to  Ifr.  Ylm,  J. 
Mathews,  comsel  for  several  open  price  associations,  by  Mr.  Samuel  Untermyer  who 
was  appointed  to  conduct  the  hearings  before  the  New  York  Joint  legislative 
Comittee  on  Housing: 

Q.  Now  we  are  talUng  about  coirpetition  and  you  are  talking  about 
cooperation,  which  is  to  my  mind  the  antithesis  of  competition.  Now  in  an  economic 

system  such  as  ours  in  this  country,  based  upon  canpetition,  you  imderstand?  A. 

Yes. 

Q.  Don't  you  see  how  absolutely  incongruous  is  the  idea  that  every 

1 2 

competitor  should  know  every  other  competitor's  business?  A.  Absolutely  noi. 

Hbv;ever  there  is  evidence  on  every  hand  that  the  attitude  of  Governmental 
bodies  toward  cooperative  activities  is  changing. 

In  the  case  of  the  United  States  vs.  United  States  Steel  Corporation, 
the  Department  of  Justice  made  the  following  concession  in  its  original  petition: 

"It  is  not  here  alleged  that  merely  assembling  and  mutually  exchanging  information 

— 

EeSr?^^^  4638^^  Degislative  Committee  on  Housing,  Dec.  29,  1920, 

2.  ’ * 

writer's  conception  of  true  competition,  see  chapter  three,. 


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190 


and  declaration  of  xmroose  amount  to  an  agreement  or  a combination  in  restraint 
1 

of  trade.” 

A letter  written  by  President  Wilson  to  Edward  N.  Harley,  then  vice- 
chairman  of  the  Federal  Trade  Commission,  dated  Iday  13,  1916  has  been  widely 
quoted  as  indicating  the  attitude  of  the  administration  under  the.  Wilson  regime. 
In  this  letter  Mr.  Wilson  said  in  part; 

”Your  s^aggestion,  tliat  trade  associations,  associations  of  retail  and 
wholesale  merehants,  commercial  clubs,  boards  of  trade,  Jtianufacturers'  associa- 
tions, credit  associations,  and  other  similar  organizations,  should  be  encouraged 
in  every  feasible  way  by  the  Government  seems  to  be  a very  wise  one.  To  furnish 
them  with  data  and  comprehensive  inforcation  in  order  that  they  may  more  easily 
accomplish  the  result  that  they  are  organized  for  is  a prooer  and  useful  Govern- 
ment function.  These  associations,  when  organized  for  the  puroose  of  improving 
conditions  in  their  particnalar  industry,  such  as  unifying  cost  accounting  and 

Dookkeeping  methods,  should  meet  with  the  apuroval  of  every  man  interested  in 

3 

the  business  progress  of  the  caontry.  ” 

Significant  of  the  trend  of  opinion  is  the  passage  of  the  Webb  bill, 
permitting  ctobinations  of  American  business  men  in  promoting  and  preserving 
foreign  trade.  This  bill  received  the  active  support  of  the  Federal  Trade  Comn>* 
ission  and  President  Wilson. 

Mr.  Robert  E.  Belt,  Chief  Accountant  for  the  Federal  Trade  Commission 
in  an  address  before  an  association  of  hardwood  manufacturers,  Jaiuary  30,  1917, 
endorsed  the  work  done  by  open  price  associations  in  the  following  language; 


1. 

United  States  vs.  Inited  States  Steel  Corooration,  233  Fed. , 155. 

3.  . , , 

Quoted  by  E.  N.  Hurley  in  his  article  entitled.  Present  Attitude  of  the 
Government  Tov;ards  Trade  Associations,  Heating  and  Ventilating  , Sent. 
1916.  Vol.  13,  pp.  46-47.  o o . 


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191 


”My  observation  has  been  that  the  associations  that  are  acconrplishing  most  in  a 

letitiroate  way,  for  the  individual  nieniDers  and  for  the  industry,  are  those  associ* 

ations  where  the  members  meet  periodically  to  e^hange  information,  coir^pare 

e:!5)erience3,  discuss  trade  problems,  and  profit  by  the  interchange  of  ideas. 

It  appears  to  me  that  cooperative  work  of  this  character  is  essential  to  the 

economic  and  financial  strength  of  our  industries,  and  to  the  full  development 

1 

of  our  domestic  and  foreign  trade. " 

Those  who  are  identified  with  the  work  of  open  price  associations 
appear  to  view  favoraoly  the  turn  taken  in  the  point  of  view  of  those  in  control 
of  governmental  affairs.  Mr.  Clark  Mcl^ercher,  former  assistant  to  the  United 
States  Attorney  General,  now  counsel  for  a number  of  open  price  associations,  is 
quoted  as  saying  early  in  1917 t "Ganeral  business  believes  that  the  Government 
is  now  on  the  right  track.*  *=*=*♦♦  "Government  espionage,  once  feared  as  a 

I 

counter  irritant  to  all  industrial  disturbances,  has  under  the  intelligent 

guidance  of  the  Federal  Trade  Commission  turned  out  to  be  an  admirable  corrective 

and  a beneficial  stimulant.  With  a restricted  jurisdiction,  the  Commission  has 

been  decidedly  encouraging  in  its  helpful  activities.  It  is  making  good  on  the 

promise  of  Commissioner  Hurley,  who,  after  speaking  of  the  assistance  rendered 

to  business  by  the  Interstate  Commerce  Commission,  Department  of  Agriculture 

and  the  Federal  Eeserve  Board,  said,  'To  do  for  general  business  that  which 

these  other  agencies  do  for  groups  to  which  I have  referred  was  the  thought  bs- 

2 

hind  the  creation  of  th®  Federal  Trade  Commission.'" 

The  recent  action  of  the  Federal  Eeserve  Board,  acting  through  the 

1. 

Belt,  R.  E. , Improved  Accounting  Methods  and  Business  Practises,  An  Address 
before  the  Hardwood  Manufacturers'  Association  of  the  United  States,  Jan.  30, 

1917,  American  Lumberman,  Fed.  3,  1917. 

2. 

Journal  of  Commerce,  Jan.  3,  1917. 


•^4 


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192 


Federal  Eeserve  Banks,  In  developing  a s ystem  -under  which  trade  data  are  to  be 
collected  and  distributed  much  in  the  same  manner  as  is  done  by  the  tynicad  open 
price  association  is  highly  significant  because  it  amounts  to  an  admission  on 
the  part  of  an  important  branch  of  the  Government  that  the  methods  employed  by 
these  associations  have  a distinct  val\ie.  The  fact  that  the  Federal  Trade 
Commission  some  months  ago  worked  out  a plan  almost  identical  to  that  of  the 
Federal  Eeserve  Board  is  of  added  significance.  The  plan  of  the  Commission  had 
to  be  abandoned  because  its  facilities  were  -unequal  to  the  taslc. 

The  plan  promulgated  by  -the  Federal  Reseiwe  Board  is  described  in  a 
general  way  in  a pamphlet  entitled^"How  is  Business",  published  early  in  1920  by 
the  Federal  Eeserve  Bank  of  Philadelphia.  In  brief  -the  purpose  is  to  secure 
from  representative  firms  in  each  of  the  more  important  lines  of  industry,  cer- 
tain figxxres  relating  to  their  production,  stocks,  -unfilled  orders,  et  cetera. 

The  same  firms  will  be  asked  to  make  these  reports  at  monthly  intervals.  The 
figures  collected  are  then  to  becon^iled  so  as  t o show  certain  facts  for  the 
industry  as  a whole,  such  as  the  increase  or  decrease  in  production  "from  a 
known  standard;"  the  increase  or  decrease  in  unfilled  orders,  and  the  increase 
or  decrease  in  raw  materials  and  finished  product  on  hand.  The  work  of  assemb- 
ling and  disseminating  such  figures  as  these  has  already  been  begun  in  some 
fields,  notably  in  the  textile  and  wholesale  grocery  lines. 

Indorsement  of  open  price  activity^ at  least  as  applied  to  the  dumber 
Industry,  has  also  been  given  by  the  Forest  Service  Bureau  of  the  Department 
of  Agriculture.  In  its  report  on  the  lumber  industry  issued  in  1917,  It  specifi- 
cally recommended  that  associations  furnish  1-umber  manufacturers  with  the  current 
trade  statistics  necessary  to  keep  them  informed  on  the  condition  of  the  market, 

1. 

Federal  Seseiwe  Bank  of  Philadelphia,  How  is  Business?  pp.  2,  4,  6. 


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193 

in  order  that  they  might  "adapt  their  own  business  t o its  changing  requirements,  " 

these  statistics  to  include  data  on  the  volume  of  orders,  shipments,  lumber  stocks 

on  hand,  and  prices.  The,  report  concludes  that  "with  adequate  safeguards  the 

public  should  encourage  such  fonns  of  cooperation  among  mamofacturers  as  a necess- 

1 

ary  means  of  making  the  lumber  industry  more  efficient. " 

That  the  various  branches  of  the  Government  are  veering  into  the 
position  of  recognizing  the  value  of  open  price  activity,  when  it  is  not  per- 
verted to  the  end  of  maintaining  or  enhancing  prices,  seems  to  be  amply  demon- 
strated in  what  has  gone  before.  No  doubt  the  war  did  much  to  bring  about  this 
revolutionary  change  in  the  attitude  of  the  Gcv  emment  toward  trade  associations, 
although  it  is  probably  true  that  it  ’.TOuld  have  comie  about  had  there  been  no 
war,  for  signs  of  such  a change  were  already  visible  prior  to  that  event.  Never- 
theless had  not  the  war  intervened,  the  change  would  undoubtedly  have  come  about 
more  slowly  than  it  did.  Daring  the  war  the  Government  fell  into  the  habit  of 
every'where  depending  upon  trade  associations  for  aid  in  lining  up  the  various 
industries  so  as  to  achieve  ma:xiirrum  efficiency  of  production.  In  fact  the  Govern 
ment,  during  the  last  few  months  of  the  mr,  told  firms  and  individ-'oals  who  were 
not  then  members  of  trade  associations,  that  if  they  wished  to  do  business  with 

the  Government  they  would  be  obliged  to  get  into  organizations  and  do  business 

2 

as  organizations  and  not  as  individuals.  It  may  oonfidently  be  predicted  that 
Governmental  recognition  of  the  necessity  fer  industrial  organization  will  not 
lapse  even  though  the  pressing  circ'omstances  which  were  instrumental  in  calling 
it  into  being  are  no  longer  ejdstent.  The  Government  has  taken  a step  which  it 
is  not  likely  to  retrace. 


1. 

. ^port  of  the  Forest  Service  Bureau,  Some  Public  and  Economic  Asoects  of  the 
Lumber  Industry,  Jan.  24,  1917,  pp.  1197-98. 
o — 

•K.ellogg,  R.  S.  The  Legitimate  P'unctions  of  Trade  Organizations,  an  address 
delivered  before  the  Business  Secretaries  Eorum,  Chicago,  Illinois.  Jan.  25. 
1918,  p.  7. 


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194 


CHAPTER  IX 

SOME  CONSIDERATIONS  INVOLVED  IN  A STUDY  OF  THE 
INFIDEJICE  OF  OPEN  PRICE  ACTIVITY  ON  PUCES 

To  atteinpt  to  ascertain  vvith  any  degree  of  accuracy  the  effect 
on  prices  exerted  hy  open  price  activity  is  indeed  a most  difficult  task. 

The  youthful  character  of  the  open  price  association  taken  together  with 
the  numerous  and  confusing  influences  at  work,  particularly  during  the  last 
few  years,  makes  the  value  of  a study  of  tMs  character  problematic.  More- 
over the  data  upon  which  to  base  such  a study  are  difficult  of  access.  Those 
who  are  in  control  of  open  price  associations  hesitate  to  permit  outsiders 
to  avail  themselves  of  the  information  that  has  been  accumulatedp-eespecially 
of  the  kind  bearing  on  prices.  Perhaps  their  attitude  may  be  chiefly  ascribed 
to  a fear  that  such  information,  were  it  released,  might  come  into  the  hands 
of  those  who  would  attecipt  to  use  it  to  Jeopardize  the  interests  of  open 
price  associations,  or  perhaps  they  are  actuated  by  the  feeling  that  as 
custodians  of  the  information  which  members  have  inraarted  to  them  they  are 
not  privileged  to  make  common  property  of  it,  and  that  to  do  so  would  be  to 
violate  the  confidence  members  have  reposed  in  them. 

Although  the  inaccessibility  of  competent  price  data  makes  it  futile 
to  attenpt  to  formulate  any  conclusions  based  on  statistics  respecting  the 
effect  of  open  price  activity  on  prices,  it  is  believed  that  some  progress 
looking  toward  an  ultimate  solution  of  this  knotty  problem  can  be  made  by 
pointing  out,  first,  the  probable  method  of  apX)roach  in  the  solution  of  such 
a problem;  second,  influences  at  work  tending  to  vitiate  the  accuracy  of  re- 
sults derived  from  a study  of  this  character;  third,  influences  tending  to 
confine  prices  to  channels  in  which  they  would  be  expected  to  run  if  their 
course  were  not  upset  by  open  price  oj^erations;  fourth,  influences  tending  to 


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V 

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195 


swerve  prices  away  from  the  course  that  they  would  "be  likely  to  talce  in  the  ab- 
sence of  open  price  activity;  fifth,  the  probable  effect  on  prices  of  the  in- 
teraction of  these  conflicting  influences. 

I.IETHOD  OF  ASCERTAINING  INlfXUENCE  ON  PRICES 

It  is  believed  that  the  best  method  to  pursue  in  determining  the 
influence  of  open  price  activity  on  prices  is  to  compare  price  data  of  two 
kinds.  The  first  kind  involves  a comparison  of  prices  secured  by  members  of 
open  price  associations  with  those  received  by  non-members.  The  object  of  this 
investigation  is  to  determine,  first,  if  all  members  are  getting  the  same 
prices  as  non-members  or  higher  or  lower  prices;  second,  if  periodic  fluctuations; 
in  members'  prices  are  more  pronounced  or  less  so  than  those  of  non-members. 

The  second  kind  involves  a comparison  of  the  prices  secured  by  members  themselves. 
The  object  of  this  investigation  is  to  determine  to  what  extent,  if  at  all, 
prices  show  a tendency  to  becomie  uniform. 

The  commodities  involved  must,  of  course,  be  of  like  kind.  Likewise 
the  investigation  should  cover  a period  of  several  years.  It  should  also  be 
established  tliat  the  non-members  whose  prices  are  used  have  had  no  access  to 
the  inf oimation  pooled  by  members. 

Information  bearing  on  prices  received  by  members  of  open  price  assoc- 
iations can  most  conveniently  be  secu.red  from  the  compiled  reports  of  sales 
issn.ed  at  periodic  intervals  to  the  membership  by  the  central  office  of  each  of 
these  associations.  Most  of  these  compil.ed  sales  reports  not  only  show  the 
individual  membership  reports  of  prices,  but  also  give  the  average  of  all 
prices  reported  for  the  period.  It  is  thought  that  sufficiently  accurate 
results  can  be  secured  by  using  these  reports  of  averages.  To  get  accurate 
price  data  pertaining  to  competitors  who  are  not  members  of  open  price  assoc- 
iations in  their  industry,  it  would  seem  necessary  to  go  to  the  records  of 


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196 


non-meinlDers  themselves.  No  doubt  it  is  very  difficult  to  secure  adeqmte  data 
from  a sufficient  number  of  competitors  to  make  these  data  representative. 
Probably  very  few  non-members  can  be  found  who  have  preserved  records  of  sales 
for  several  consecutive  years. 

The  question  might  be  raised  why  prices  given  in  trade  journals,  or 
in  the  reports  of  the  Bureau  of  Labor  Statistics  or  other  recognized  sources  of 
price  information  may  not  properly  be  used  to  represent  the  prices  secured  by 
non-members.  The  difficulty  with  this  proposal  is  that  these  prices  are  a com- 
posite of  prices  received  in  the  industry  as  a whole;  for  this  reason  they  are 
representative  of  neither  the  group  of  non-members  nor  the  group  of  members  but 
of  both  groups.  If  the  industry  were  wholly  within  the  control  of  an  open 
price  association,  figu.res  taken  from  these  sources  might  be  of  some  value 
when  compared  with  figures  covering  a period  prior  to  the  existence  of  the 
association,  provided  tliat  proper  allowance  could  be  made  for  such  changes  in 
the  economic  situation  as  might  have  occurred  in  the  course  of  the  transition 
from  one  period  to  the  other. 

Although  it  appears  exceedingly  difficult  to  secure  competent  data 
at  the  present  time,  even  if  no  other  sources  of  information  are  made  available, 
no  doubt  future  litigation  involving  open  price  associations,  or  investigations 
made  of  them  by  the  Federal  Trade  Commission  will  reveal  mch  info rna,t ion  of 
an  illuminating  character,  bearing  on  prices  received  by  non-members  as  well 
as  members. 

The  Eecord  of  the  United  Stated  vs.  The  American  Column  and  Limber  Co. 
et  al.  offers  the  first  considerable  contribution  of  price  data  available  for 
study.  In  this  case  the  defendants  introduced  several  charts  Indicating  prices 
received  during  1919  for  different  kinds  of  hardwood  by  conroetitors  who  were 
not  merrbers  of  the  "Open  Competition  Plan".  This  open  price  plan  was  that  in 
use  by  the  American  Hardwood  I/Tanufacturer*  s Association  (l). 

!=i==~j^2£2HlL-2£..£lHLJ:IL-2l3§£te^  137-148.  


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197 

In  addition  the  defendants  introduced  cories  of  all  the  sales  reports  compiled  07 
the  Manager  of  Statistics  aiid  disseminated  among  the  memoership  di^ring  the  year 
1919.  This  was  done  in  order  that  comparisons  might  he  made  between  prices  chargad 
by  members  and  prices  ciiarged  by  non-members,  the  contention  of  the  defendants 
being,  that  such  comparison  would  reveal  that  members  were  neither  maintaining  fix- 
ed prices  nor  were  they  securing  prices  any  higher  that  those  receivediy  outside 
competitors.  The  Transcript  of  Eecord,  which  was  all  of  the  Eecord  that  was  acc- 
ess! ole  to  the  vsrriter,  contains  charts  giving  the  prices  that  were  received  by  cer- 

1 

tain  non-memoers  for  the  entire  year  of  ISIS,  but  the  reports  of  sales,  showing 

prices  received  by  members,  diuring  1919  are  not  given  in  their  entirety  in  the 

2 

Transcript  of  Record.  The  Manager  of  Statistics,  however,  placed  at  the  v/riter's 
disposal  all  of  the  sales  reports  issued  during  ISIS.  It  was  found  possible  to  ex- 
tract price  data  from  these  reports  of  sales  which  were  comparable  to  the  data 
contained  in  one  of  the  charts  showing  prices  received  by  a non-member.  Prices  re- 
ceived by  non-members  as  shown  on  the  other  charts  could  not  be  made  corn-arable 
wi on  prices  contained  in  the  reports  of  members'  sales  because  kinds,  grades,  or 
thicknesses  of  lumber  did  not  correspond.  In  the  instance  where  it  was  found 
possible  to  make  a comparison,  the  graphs  which  the  writer  plotted  to  show  the 
orend  ox,  prices  in  each  case,  disclosed  that  the  average  prices  received  by  members 

of  the  association  for  the  year  1919  were  no  higher  than  those  received  by  tliis 

3 

particular  non-member. 

The  v/riter  also  prepared  a chart  with  four  graphs,  three  of  them  shewing 
the  average  weexly  prices  received  by  three  leading  manufacturers  of  hardwood,  the 
fourtn  snowing  the  average  weekly  prices  of  all  members.  The  period  covered  was 
from  July  26th,  1912,  to  December  27th,  of  the  same  year. 


i'.J^cord.  Americaii  C0I.&  Lura.Co.,v:%  lb.  S. , Yol. 3,Krebs  Exhib. ITo.  l.u.  1509 ; May 
Exhio.No.l,p.lol3;  Wertz  ExMb.  1.  ,p.  1613',  Thomas  Exhlb.  No. l,p.  1398. 

Reports  of  sales  are  shov'.n  for  the  month  of  January,  1920;  Record,  Vol.l, 
Exhib.  "A",  p.  33. 


3. 


See  chart  No.l,  in  this  chapter 


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198 


An  exmaination  of  this  chart  reveals  at  a glance  that  the  prices  received  hy  each 
of  these  man-ufactnrers  varied  widely  from  time  to  time;  nor  can  one  trace  any 
existing  relationship  "between  the  prices  received  "by  the  niannfacturers  and 
t he  average  prices  received  "by  all  the  roem'bers.  Ass'jming  that  the  trend  of 
these  prices  may  "be  considered  typical  of  that  of  all  the  other  members,  the 
inference  to  "be  dravm  therefrom  is  that  open  price  activity  among  members  of  the 
Hardwood  lilanu^acturerb*  Association  did  not  lead  to  uniformity  in  price  policy, 
at  least  during  the  year  1919. 

That  the  statistical  conclusions  indicated  on  the  charts  drawn  by  the 

writer,  although  inconclusive  in  themselves  because  based  on  inadequate  data, 

truly cbpict  the  character  of  the  prices  received  by  members  during  1919  is 

attested  to  by  several  purchasers  who  stated  that  the  prices  paid  by  them  to 

different  member  were  neither  uniform  nor  were  they  any  higher  that  those  paid 
2,3 

to  non-members. 

In  this  connection  it  must  be  pointed  out,  however,  that  the  price  data' 
taken  from  the  association  reports  of  sales  cannot  properly  be  used  as  a basis 
for  determining  the  effect  of  open  price  activity  on  prices  because,  as  indi- 
cated  elsewhere,  only  to  a very  small  extent  did  members  use  the  sales  re- 
ports issued  in  1919  as  a guide  to  the  trend  of  the  market,  for  by  the  time  that 
they  were  received  from  the  Manager  of  Statistics  ( a week  or  two  subsequent  to 
the  time  when  the  sales  listed  were  made)  current  market  prices  had  advanced 
so  far  ahead  of  those  listed  on  sales  reports,  that  the  latter,  if  they  had  been 


See  chart  No.  2,  in  this  chapter. 

2*  See  Becord,  Vol.2,p.  1372;  1367;  1394;  1395;  Yol.  3, p.  1563; 

See  Chart  No.  3.  in  this  chanter;  shows  variation  in  prices  received  by  members 
during  19x9. 

4. 

Chapter  6,  pp.  124-125. 


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199 


taken  as  a guide  would  in  a great  many  instances  have  resulted  in  sales  at 

prices  helow  the  current  rate.  Only  the  class  of  small  manufacturers  seem  to 

have  derived  any  benefit  from  studying  the  sales  reports.  Even  though  the  prices 

listed  on  the  sales  reports  were  below  the  best  market  prices  then  prevailing, 

yet  they  were  higher,  apparently,  than  the  ones  these  small  manufacturers  had 

been  accustomed  to  receive  prior  to  their  entry  into  the  association.  Of  the 

numerous  letters  received  by  the  Ifenager  of  Statistics  in  commendation  of  the 

Open  Competition  Plan,  all  of  those  which  pointed  to  the  fact  that  ^he  plan 

1 

enabled  meuibers  to  get  better  prices  were  from  small  manufacturers.  An  un- 
precedented demand,  accompanied  by  a shortage  of  supply  resulted  in  such  a rapid 
advance  in  pri  oes  that  the  sales  reporting  system  proved  unequal  to  the  task  of 

keeping  members  properly  aporised  of  the  latest  price  developments.  It  is 
obvious,  therefore,  that  the  results  secured  by  the  writer  from  a study  of  these 
sales  reports  reveals  nothing  of  importance  respecting  the  influence  exerted  by 

the  open  price  system  on  prices.  Perhaps  it  is  reasonable  to  assume  that  on  a 
rapidly  declining  market  sales  reports  would  have  been  equally  worthless  as  an 
index  of  the  trend  of  prices. 

The  failure  of  the  sales  reporting  feature  of  the  Open  Competition 

Plan  to  fulfill  its  mission  in  this  instance  points  to  the  important  conclusion 

. 

that  when  confronted  by  abnormal  conditions,  the  system  may  prove  too  inflexible 
to  adapt  itself  to  the  new  situation,  the  consequence  being  that  the  course  of 
prices  is  less  affected,  perhaps,  than  it  v/culd  otherwise  be.  Probably  the 
course  of  nrices  would  not  be  totally  unaffected,  because  other  features  of  the 
open  price  system  might  continue  to  function  more  or  less  normally,  ^oe  open 
price  machinery  involved  in  the  interchange  of  information  pertaining  to  stocks, 
output  and  the  like  might  continue  to  operate  effectively. 


1.  Boyle,  L.  C.,  Argument  before  the  Supreme  Court,  p.68. 


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200 


THE  IIEED  OE  EX&.RCISIHG  CAFE  IH  CHOOSING  DATA  FOR  STUDY 

Considerable  discretion  nxast  be  exercised  in  imldLng  a choice  of  open 

price  associations  for  study.  I^'Iany  so-called  open  price  associations  are  in 

reality  combinations  in  restraint  of  trade,  seeking  to  conceal  their  real 

identity  by  calling  themselves  open  price  associations.  Associations  of  this 

character  accomplish  their  purp^ose  to  curtail  production,  or  maintain  or 

enhance  prices  by  "ed^icating"  members  to  act  in  harmony  in  pursuance  of  a 

common  policy.  In  its  report  on  the  lumber  industry  the  Forest  Bureau  of  the 

United  States  Department  of  Agriculture  concluded  tliat  there  was  a clear-cut 

distinction  between  the  services  performed  by  open  price  associations  and 

2 

activities  in  restraint  of  trade.  No  doubt  this  is  true,  but  as  has  ’oeen 
indicated  in  the  preceding  ciiapter,  some  so-called  open  price  associations  are  so 
clever  in  their  "educational"  activities  that  only  the  most  discerning  are  able 
to  properly  discriminate  betv;een  these  activities  and  those  carried  on  by  true 
open  price  associations  which  exist  for  the  legitimate  purpose  of  keeping  mempers 
properly  informed  of  market  conditioxis.  If  an  investigator  making  a study  of 
the  influence  of  open  price  activity  on  prices  were  to  commit  the  error  of 
choosing  for  study  an  association  more  properly  termed  a combination,  the 
results  obtained  from  such  an  investigation  would  obviously  be  vitiated  as  far 
as  being  a reflection  of  true  open  price  activity  is  concerned.  Results  of 
this  kind  v/ould  not  only  have  no  scientific  worth,  but,  if  given  currency, 
might  work  a grave  injustice  to  the  cause  of  legitimate  open  price  activity. 


1.  See  Chapter  Vlll,  pp.  175-182. 

2.  Report  entitled  Some  Public  and  Economic  Aspects  of  the  Lumber  Industry  , 

•Jan.  24,  1917,  Record,  American  Column  & Lumber  Co.  vs.  United  States  Fol.  2,p.  1198. 


>ve- 


201 


IIIBTUEITCES  AT  YJOEK 


1_ 

It  has  "been  argued  elsewhere  that  a knowledge  on  the  part  of  "bTiyers 
and  sellers  of  their  C'm  interest,  implying  a Icnowledge  of  all  conditions  that 
might  have  a bearing  on  the  supply  of  and  the  demand  for,  a given  unit  of  com- 
modity, together  with  the  ability  and  willingness  to  intelligently  act  thereon, 
would  result  in  similar  exchanges  taking  place  bn  similar  terms;  or  to  state  the 
proposition  in  terms  of  price,  it  would  result  in  the  naming  of  an  equilibrium 
price  "for  the  same  unit  of  the  saiiie  quality  of  the  same  article  in  the  same 
market."  Jevons  exoresses  the  same  thought  when  he  says,  that  "in  the  same 

2 

market,  at  any  one  moment  there  cannot  be  two  prices  for  the  same  kind  of  article." 
The  concept  here  conveyed  is  undaubtedly  at  the  basis  (consciously  or  unconscious- 
ly) of  the  argunents  of  those  who  contend  that  open  price  work  enhances  competi- 
tion  and  stabilizes  prices. 


1.  C5hapter  111,  pp.  44-47. 

2.  Jevons,  W.  Stanley,  The  Theory  of  Political  Economy,  p.  91. 

3.  By  way  of  illustration  of  the  point  of  view  that  open  price  activity  tends 
to  stabilize  prices,  an  extract  from  a report  rendered  to  members  of  the  Aner- 
ican  Hardwood  MEinufacturers’  Association  by  a committee  appointed  to  look  into 
the  merits  of  the  open  price  plan  and  devise  a system  applicable  to  the  hardwood 
industry  is  quoted: 

"By  maiclng  prices  known  to  each  other  they  will  gradually  tend  toward 
a standard  in  harmony  with  market  conditions,  a sitTiation  advantageous  to  both 
buyer  and  seller.  The  conraittee  does  not  expect  this  plan  to  result  in  one 
price  for  any  one  grade  and  the  difference  between  even  the  same  grades  of 
various  manufacturers  is  \to11  recognized.  It  is  contended,  hov/ever,  that  in  a 
very  short  time  the  extreme  range  of  prices  on  any  one  grade  will  be  materially 
reduced  and  eventually  the  prices  obtained  will  be  in  direct  relation  to  the 
character  of  the  grade  offered  and  the  prevailing  market  conditions."  Anericai 
Lumbennan,  Feb.  30,  1917.  The  Forest  Service  of  the  U.  S.  Dept,  of  Agriculture 
also  concludes  that  open  price  work  tends  to  unify  rates.  See  Eeport  on  Timber 
Depletion,  Lumber  Prices,  Lumber  Exports,  and  Concentration  of  Timber  o^mership.  , 
Juuie  1,  1920,  p.  68. 

4.  The  view  that  open  price  work  increases  competition  may  be  illustrated  by 

an  extract  taken  from  testimony  given  by  W.  M Stark,  a manufacturer  of  hardwoods, 
in  the  Hard\vood  Case: 

"Affiant  says  that  from  his  observation  of  the  Open  Competition 


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202 


If  all  the  factors  in  operation  in  the  case  of  0]pen  price  activity- 
are  identical  with  those  which  find  expression  in  the  law  of  supply  and  de/ioand 
(i.e.  the  economic  principle  described  above),  it  seems  reasonable  to  conclude 
that  open  price  work  does  lead  to  exchanges  taking  place  on  similar  terms,  with 
uniform  rates  emerging  as  a matter  of  course.  It  is  conceivable,  however,  that 
price  xiniformity  can  emerge  thro-ugh  association  work,  despite  differences  in 
the  factors  at  work,  btit  it  is  not  tho'cujht  that  such  uniformity  vdll  ensue  as  a 
result  of  sellers  acting  independently  of  each  other  in  their  capacity  of  oargain- 
ers,  but  rather  that  it  will  come  as  a result,  not  necessarily  of  direct  agreement, 
but  of  the  power  of  s-aggestion,  perhaps,  conveyed  to  members  by  precept  or  example 
emanating  from  leaders.  By  a long  stretch  of  the  imagination  it  is  possible  to 
conceive  of  price  -uniformity  being  achieved  without  premeditation, --if  members 
form  the  habit,  for  instance,  of  guiding  their  own  price  policy  by  that  of  one 
or  two  of  the  outstanding  leaders  in  the  industry.  In  fact  the  cons-urmation  of 


plan,  he  is  convinced  that  there  is  nothing  whatever  in  txie  nature  of  the  plan 
itself  or  its  use  by  the  jjjnerican  Hardwood  Manufacturers’  Association  which  has 
tended  or  '^dll  tend  to  suppress  or  restrict  competition,  but  on  the  contrary,  it 
tends  to  create  a freer  and  broader  and  more  -unrestricted  miancet  in  which  all 
sellers  and  buyers  may  and  do  freely,  actively  and  Intelligently  compete.  Yiliile 
knowledge  of  market  conditions  will  naturally  and  properly  enable  some  persons 
to  sell  to  better  advantage  than  if  dealing  in  the  dark,  this  is  only  an  incident 
of  any  open  market  against  which  should  be  considered  the  general  effect  on 
market  conditions  as  a whole  and  in  the  long  run.  From  this  aspect,  information 
which  directs  the  production  and  selling  efforts  of  lumbermen  to  supplying  the 
market  needs  for  which  and  market  points  at  which  there  is  the  greatest  demand, 
necessarily  increases  competition  and  works  for  the  benefit  of  the  buyers  and 
cons-uming  public.  Obviously  and  properly,  it  also  works  for  the  benefit  of  the 
lumberman,  as  they  can  only  profit  by  supplying  the  demand.  ” Eecord,  American 
Col-umn  & Lumber  Co.  , vs.  United  States,  Vol.  2,  p.  1260. 


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. ■'•  •’'  * " •'J.SV-  oe  <fl  li  V-,  ...a—  ■ ^ - "'  ’ ^ ^-X-rJUgio 

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■ . ''W  --■'■’.'J  .'V.T'  ^ 


203 


such  a result  inay  he  facilitated  hy  the  very  ignorance  of  buyers.  Lacking  the 
power  that  comes  with  knowledge  they  are  likely  to  look  upon  the  cornpetitire 
sit-'oation  which  confronts  them  as  being  unchangeable  and  may  accept  such  prices 
as  are  quoted  them  out  of  a spirit  of  helplessness  bom  of  the  feeling  that  they 
are  powerless  to  do  othervdse. 

The  problem  which  we  face,  then,  is  to  determine  to  what  extent  there 
is  justification  for  believing  that  open  price  work  is  a realization  of  the 
ideal  kind  of  competition  contemplated  by  the  law  of  supply  and  demand,  pre- 
supposing the  existence  of  an  open  market  in  which  numerous  buyers  and  numerous 
sellers,  each  conscious  of  the  bids  and  offers  of  the  others,  work  out  a common 
price.  Assuming  for  the  present  that  sellers,  through  open  price  work,  possess 
sufficient  knowledge  of  market  conditions  to  enable  them  to  act  with  intelligence 

in  the  furtherance  of  their  interests,  are  also  buyers  in  this  happy  position? 

1 

The  burden  of  the  argument  in  chapter  three  is  that  they  are  not.  In  tliat 

chapter  the  reader*  s attention  vt3,s  cs-lled  to  the  fact  tliat  Mr.  Eddy  designed  the 

open  price  plan  primarily  from  the  point  of  view  of  the  seller.  Moreover  the 

1 

observation  has  also  been  made  elsewhere  that  v.dth  a few  exceptions,  open  price 

associations  are  not  disposed  to  give  buyers  access  to  information  which  they 
2 

have  accijmulated. 

Previous  to  the  inauguration  of  the  open  price  movement,  buyers  held 
the  ad\'’antage  in  bargaining.  By  malcing  wide  inquiries  for  bids  they  were  en- 
abled to  ascertain  roughly,  at  least,  what  idling  prices  were, -and  the  accuracy 
of  these  prices  was  of  course  unquestioned.  But  the  seller,  as  a rule,  was  in 


1. 

2. 


See  pp.  48-49. 

A 1 <5  t.bqt.  Tnemberahin  is  usually  limited 


say- 


fi 


oneration  of  s^och  associations(open  Prics)of  benefit  to  the  producer  ^d  the  con- 


’.rmer  alike,  but  unfortxinately  the  tendency  is  here  manifested  to  confine  the  in- 
ormation  to  members.  "Chicago  Tribime,  April,  13, 1921. 

A notable  exception  is  the  American  Hardwood  Ifenufacturers*  Assn. 


2 9: 

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204 


ignorance  regarding  the  prices  that  competitors  were  asking,  except  in  so  far  as 
salesmen  and  huyers  kept  him  informed.  The  latter  found  it  prcfitaole  to  mis- 
represent to  the  seller  the  character  of  prevailing  prices,  with  the  result  that 
the  seller  was  often  deceived  into  meeting  prices  which  }iad  never  been  quoted,  the 
prices  thus  made  being  less  than  market  conditions  joxstified. 

With  the  initiation  of  the  open  price  movement,  however,  buyers  find 
the  tables  turned  against  them.  They  discover  that  they  are  at  a disadvantage 
in  bargaining,  principally,  first,  because  they  do  not  know  what  other  b-oyers 
are  paying;  second  because  they  are  ignorant  of  the  character  of  demand  and 
supply;  third,  because  they  are  \mable  to  make  accurate  predicitions  of  future 
market  conditions.  They  lack  the  data  upon  which  calculations  of  this  kind 
are  based.  Ivkich  of  these  data,  such  as  information  bearing  on  production  .and 
stocks,  for  instance  is  not  obtainable  by  buyers  except  with  the  cooperation  of 
the  sellers.  Vfe  have  here,  then,  a situation  in  which  the  sellers  as  a class 
are  well  informed  of  market  conditions,  whereas  the  buyers  as  a class  are  poor- 
ly informed.  Since  one  of  the  iiqjortant  premises  to  the  law  of  supply  and  de- 
mand, namely,  tliat  both  buyers  and  sellers  must  be  accpainted  with  all 
conditions  affecting  their  competitive  sit'oation,  is  violated,  it  follavs 
that  similar  exchanges  among  buyers  and  sellers  can  not  take  place  on  sirioilar 
terms.  Jevons  specifically  mentions  imperfect  knowledge  of  the  market  as 

one  of  the  "extraneous  circumstances"  v/hich  interfere  v/ith  the  undisturbed 

1 

functioning  of  this  economic  principle.  The  advantage  enjoyed  by  the 
seller  over  the  buyer  in  consequence  of  his  superior  knowledge  of  market 
conditions  probably  will  express  itself  in  the  exaction  of  a higher  price 
than  v/ould  otheiv/ise  obtain.  One  must  conclude,  then,  that  members  of  an 
open  price  association  are  in  a position  to  e:cact  higher  prices  than  they  could 
were  buyers  equally  well  informed  or  were  not  open  price  activity 

Theory  of  Political  Economy,  p.  91. 


-s-arsw^.ji 


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205 


1 

existent* 


This  conclusion,  however,  is  based  on  the  assumption  that  members  are 
able  to  press  their  advantage  to  the  limit  without  hindrance.  Such  a sit- 
uation, of  course,  obtains  only  in  theory.  This  invites  the  question;  to  what 
extent  in  practice  may  open  price  associations  be  able  to  utilize  the  theoreti- 
cal advantage  enjoyed  by  them  in  consequence  of  their  superior  facilities  for 
securing  adequate  market  information.  The  task  involved  in  bringing  to  light  the 
numerous  influences  that  are  undoubtedly  wrapped  up  in  this  situation  is  one  that 
is  difficult  if  not  impossible  of  achievement.  A study  of  those  influences 
which  stiggest  themselves  to  the  writer  convinces  him  that  in  practice  open 
price  associations  are  little  able  to  utilize  their  superior  knowledge  of  the 
market  to  the  end  of  imposing  higher  prices  upon  the  buyer. 

Influences  at  work  tending  to  minimize  the  effect  of  open  price  work 
on  prices  can  be  traced  to  the  follo?/ing  sources;  first,  defects  in  the  opera- 
tion of  the  reporting  system;  second,  failure  of  members  to  utilize  the  in- 
formation conveyed  to  them  through  the  reporting  system:  third,  the  limited 
sphere  of  control  excercized  by  open  price  associations. 

Defects  in  the  operation  of  the  reporting  system  manifest  themselves 
chiefly  in  the  following  ways:  first,  by  incomplete  standardization  of  the 
articles  about  which  price  information  is  exchanged,  making  price  comparisons 
more  or  less  worthless;  second,  by  the  unreliable  character  of  information 
collected  and  disseminated. 

Obviously  price  comparisons  can  not  be  made  if  the  articles  about 
which  price  information  is  exchanged  are  not  comparable  in  every  respect. 


1. 


The  Secretary  of  the  National  Association  of  Purchasing  Agents  writes  in  part: 
'•The  real  function  of  the  open  price  association,  as  we  see  it,  is  to  permit 
producers  to  charge  for  their  commodities  not  on  the  basis  of  their  production 

values,  but  on  the  basis  of  all  that  the  market  will 

sympathize  with  this 


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206 


Differences  in  size,  shape,  quality,  woriananship,  and  the  like,  are  bound  to  re- 
flect themselves  in  differences  in  price.  Miere  these  differences  persist  there 
is  lacking  the  common  basis  for  comparison  that  is  needed  if  interchange  of 
information  is  to  have  any  effect  on  the  course  of  prices.  Standardization 
iciently  adequate  to  make  prices  comparable  is  difficult  of  achievement. 

This  fact  has  been  conmented  upon  in  another  connection. 

To  what  has  been  stated  there  by  way  of  elucidation  of  some  of  the 
difficulties  involved,  may  be  added  some  coriments  by  Mr.  C.  H.  E,ohrbach  and 
John  Allen  Murphy  taken  from  an  article  of  theirs  v/hich  appeared  in  Printers 
Ink>  ”Th«  prices  of  leading  makes  of  talking  machines  are  not  alike  and  no 
amount  of  price  infoiroation  could  get  them  on  the  same  basis,  because  they  are 
not  alike  in  quality  and  workmanship.  Take  leather  belting,  corsets,  air 
compressors,  office  furniture,  overalls,  knit  goods,  hydraulic  pumps,  silver- 
ware, clocks,  vacuum  cleaners,  etc.-  some  of  which  have  and  other  have  not  an 
open  price  association.  There  are  too  many  dissimilarities  in  tnese  proaucts 
to  permit  their  getting  on  a uniform  basis,  and  although  the  open  price  idea 
may  be  of  use  in  some  such  cases,  it  can  only  be  of  limited  help  to  the  in- 
dividual manufacturer  in  determining  what  he  shall  get  for  his  product.  It 

2 

can  not  establish  a uniform  price.” 

In  chapter  six  where  the  advantages  and  disadvantages  associated  with 
open  price  work  received  attention,  it  was  pointed  out  that  the  usefulness  of 
the  open  price  association  is  very  frequently  seriously  impaired  because  the 
information  interchanged  is  either  inaccurate,  misleading,  or  obsolete.  If, 
for  any  of  these  reasons,  members  become  distrustful  of  the  reliability  of 


Chapter  6,  p.  118,  125,  126 

2. 

Rohrbach,  C.  H.,  and  Murphy,  J.A.,  The  Reverse  Side  of  the  Open  Price 
Association,  Printers'  Ink,  June,  24,  1920,  p.  41. 


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207 


the  sources  of  information  wMch  they  receive  they  are  likely  to  act  independ- 
ently of  that  information  and  in  consequence  prices  are  less  influenced  than 

1 

would  otherwise  he  the  case. 

Failure  of  memhers  to  utilize  the  information  conveyed  to  them  throu^ 
the  operation  of  the  open  price  system  may  he  due  either  to  a deliberate  dis- 
regard of  such  information,  or  to  inability  to  under atand  it,  or  to  inability  to 

3 

act  upon  it  even  though  understood.  One  secretary  vn:ites  that  members  have 
freq'uently  addressed  letters  to  him  incjjiring  what  luling  prices  for  certain 
commodities  were,  v/hereas  the  sales  reports  containing  tiiis  information  were 
probably  lying  on  their  desks  at  the  very  time  when  they  were  mailing  their 
letters,  lany  members,  no  doubt,  disregard  the  I'eoorts  received  becaase  to 
properly  understand  and  interpret  them  these  repiorts  must  be  given  time  and 
thought,  and  this  they  are  unwilling  to  do.  Ho  doubt  there  are  also  those  who 
can  not  understand  the  reports,  llore  often  perhaps  information  is  not  utilized 
because  members  find  themselves  in  a x^osition  where  they  are  unable  to  act  upon 
it.  To  give  one  instance,  - information  received  from  the  central  office  may 
malce  it  clear  that  market  conditions  are  such  as  to  make  it  feasible  to  cease 
manufacturing  for  a period.  The  necessity  of  meeting  heavy  overhead  expenses 
may  force  him  to  continue  operations,  despite  the  fact  that  his  better  judge- 
ment would  dictate  a policy  of  curtailment.  Failure  to  utilize  information  is 
therefore  another  factor  operating  to  prevent  open  price  work  from  influencing 
the  co'orse  of  prices. 

It  is  thought  that  because  of  the  serious  obstacles  operating  to  pre- 
vent the  spread  of  open  price  activity,  particularly  in  the  larger  industries 

h 

See  pio.  122,  124. 

2. 

Ibid,  113,  120,  121. 


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208 


where  competitors,  as  a rule,  are  relatively  numerous,  if  statistics  could  be 

made  available,  they  would  disclose  tliat  open  price  associations  do  not  enjoy 

1 

a controlling  influence  in  many,  if  any,  of  the  larger  industries.  If  this  be 
true,  there  is  ample  reason  to  believe  that  open  price  associations,  as  consti- 
tuted at  present,  are  able  to  ejcert  little  influence  on  price  movements.  Their 
sphere  of  influence  and  control  is  confined  within  too  narrow  limits.  They  f ind 
themselves  more  or  less  helpless  to  influence  the  price  situation,  first,  because 
of  the  presence  of  indirect  and  potential  competition;  second,  because  of  the 
power  everted  over  price  movements  by  competitors  who  are  not  association  members. 
By  reason  of  the  danger  of  competition  from  substitutes  and  new  capital,  prices 
are  likely  to  be  confined  to  narrower  limits  of  variation  tlian  v'Otild  otherw.dse 
be  the  case.  VJhat  these  limits  will  be,  asstuting  that  no  other  conflicting 
factors  enter  into  the  situation,  will  largely  depend,  on  the  one  hand,  unon  the 
ease  with  which  potential  competition  can  become  actual  competition,  and  on  the 

2 

other  hand,  upon  consumers'  willingness  and  readiness  to  resort  to  substitutes. 

If  the  sphere  of  control  is  insufficient  to  permit  the  educating  in-, 
fluence  of  the  association  to  be  felt  by  competitors  in  whom  are  represented  a 
substantial  proportion  of  the  total  productive  capacity  of  the  industry,  it 
appears  more  than  probable  that  the  competitors  outside  the  sphere  of  this  in- 
fluence will  be  more  instrumental  in  detennining  the  price  situation  than  will 
association  members.  Competitors  outside  the  ranks  of  membershio  are  presumably 
less  well  informed  about  conditions  affecting  the  market  tlian  are  members.  As  a 


For  discussions  bearing  on  tills  matter,  see  ch. l,pp.5-6;  ch.  6, pp.  113-126. 

P 

Mr.  H.  R.  Tosdal,  in  an  article  on  Open  Price  Associations,  concludes  that, 

"in  the  absence  of  some  basis  for  monopoly,  the  condition  of  higher  tlian  nomal 
return  would  attract  new  capital  and  eventually  the  rate  of  return  would  be 
restored  to  normal."  See  American  Economic  Review,  Vol.  7,  No.2,  June  17, 1917, p. 333 


•C  ^ Ov  aL;.  :•  . -.:-  5>:  -VI  ic  «J5^V 

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1 

class  their  knowledge  of  the  costs  of  doing  "business  is  less  thoro-agh.  Lacking 
information  bearing  on  the  character  of  the  con^etitive  situation,  and  being 
relatively  ignorant  of  costs,  it  is  very  probable,  that  in  their  ankLety  to  make 
sales,  th&y  will  permit  themselves  to  quote  lower  prices  than  they  would  if  they 
were  acquainted  with  all  the  facts.  Tne  disposition  of  many  buyers  to  take  ad- 
vantage of  the  ignorance  of  sell  rs,  inducin  them  through  misrepresentation 
to  quote  lower  prices  than  competitive  conditions  warrant,  gives  added  weight 
to  this  prediction.  Knowledge  brings  power.  Lac ’td.ng'  knowledge  it  becomes 
almost  a certainty  tbat  competitors  outside  the  ranks  of  membership  in  an  open 
price  association  will  secure  lo^^er  prices  than  those  inside.  LJany  manufacturers 
of  hardwood  lujnber,  particularly  those  who  had  no  sa  es  organization,  attested 
to  tile  fact  that  they  had  sustained  losses  which  they  could  hzive  averted  if  they 
had  had  proper  market  information.  Other  manufacturers,  not  belonging  to  the 
American  Hardwood  Ivlan^ktacturers'  Association,  v.ho  had  sales  organizations,  fared 
a little  better  because  their  salesmen  kept  them  acquainted  in  some  degree  with 
the  trend  of  the  market. 

If  low  priced  competitors  are  present  in  an  industry  in  sufficient 
numbers  they  are  likely  to  e.®rt  the  determining  influence  in  the  establishment 
market  rates,  for  purchasers  v/ill  give  their  custom  to  those  who  make  the  best 
prices,  assujning  that  all  other  conditions  entering  into  the  situation  are 
equal.  The  fact  that  all  other  conditions  are  not  on  a par  of  equality  probably 
accounts  in  some  degree  for  the  fact  tliat  prices  v;hich  are  recognized  as 
being  typical  of  the  market  are  somewhat  higher  than  those  secured  by  the  lowest 


Mr.  E.  N.  Hurley,  former  chairman  of  the  Federal  Trade  Commission  has  stated 
that  only  10  per  cent  of  man-'ufacturers  and  merchiants  know  the  cost  to  manufacture 
or  sell  their  products;  th.it  40  per  cent  estimate  what  their  costs  are  and  50 
per  cent  have  no  method  of  determining  their  costs  but  price  their  goods  arbi- 
trarily. See  article  in  Metal  Worker,  Plumber  & Steam  Fitter,  Trade  Associations 
and  Business  Methods,  Vol.121,  p.473,  Jan. 9, '16. 


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210 


priced  competitors.  For  one  thing  the  lowest  priced  competitors  may  lack  the 
necessary  productive  capacity  to  handle  large  orders;  then,  too,  their  product 
may  not  he  up  to  standard,  or  they  may  he  unreliable  in  some  other  way.  never- 
theless the  influence  of  these  low  prices,  as  well  as  those  not  so  low,  quoted 
hy  non-memhers,  exposes  members  to  the  danger  of  losing  some  of  their  custom.  If 
the  productive  capacity  represented  hy  these  outside  competitors  is  sufficiently 
great,  members  will  he  compelled  to  place  their  rates  in  line  with  theirs  in 
order  to  insure  for  themselves  the  share  of  business  to  which  they  have  been 
accustomed. 

That  some  open  price  associations  are  cognizant  of  the  fact  that  their 
limited  sphere  of  control  makes  them  more  or  less  helpless  to  exert  any  sub- 
stantial influence  on  the  price  situation  is  evident  from  the  following  extract 
taken  from  a letter  received  by  the  writer  from  the  Secretary  of  the  Northern 
Hemlock  and  Hardwood  Ivlanufacturers'  Association; 

"In  view  of  the  fact  that  the  members  of  our  Association  produce  only 
a part  of  the  lumber  produced  in  this  territory,  in  view  of  the  further  fact  that 
this  territory  produces  only  a small  part  of  the  lumber  consumed  in  its  markets, 
we  cannot  say  that  the  information  we  have  supplied  our  members  has  had  any 
particular  effect  on  market  value  fluctuations. 

"There  is  about  sixteen  times  as  much  Pine  produced  as  there  is  of 
Hemlock  from  our  territory  and  six  or  seven  times  as  much  Western  lumber  and  all 
of  these  cane  into  direct  competition  in  the  Chicago  market  belt. 

"Freight  rates  have  long  been  so  adjusted  as  to  bring  this  about.  O’-ir 

Hemlock  prices  are  determined  by  the  market  values  of  Southern  Pine  and  Western 

Fir  and  our  Hardwood  values  are  determined  by  the  market  values  of  Dale,  Gum  and 

Ash,  all  of  which  are  produced  in  much  greater  quantities  in  other  sections  of 

1 

the  country,  but  adopted  to  the  same  uses  as  our  Birch,  Beech  and  I/Iaple.  " 


1. 

Swan,  0.  T. , Letter  dated  Jan.  4,  1921. 


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211 

No  dou’Dt  there  will  be  fotind  many  instances  where  individual  members 
have  succeeded  in  getting  better  prices  as  a result  of  participation  in  open 
price  work.  That  does  not  mean,  however,  that  the  a ssociat  ion  (assmiing  that 
it  does  not  enjoy  a controlling  influence  in  the  industry)  has  succeeded  in 
raising  prices  in  the  industry  as  a whole,  nor  it  is  probable  that  in  the  in- 
stances where  members  liave  been  able  to  secure  better  prices,  these  prices  have 
been  any  higher  that  the  ones  current  araong  outside  competitors. 

The  data  brought  out  in  the  jjardwood  Case  point  to  the  conclusion  that 
in  the  instances  where  members  did  secure  better  prices,  they  succeeded  in  doing 
so  becjause  open  price  work  enabled  them  to  e:!act  the  so-called  market  price, 
whereas  before,  they  had  been  unable  to  do  so.  As  previously  stated,  it  is 
significant  that  of  the  numerous  letters  received  by  the  Ivlanager  of  Statistics 
of  the  American  Hardwood  !4anufacturers’  Association,  in  commendation  of  the  Open 
Competition  Plan,  every  letter  asserting  that  the  plan  had  enabled  members  to 
get  better  prices  wasfrom  a small  manufacturer.  Testimony  reveals  that  as  a 
class  the  small  producer  was  unable  to  command  the  market  price  of  hardwood 
lumber  because  buyers  took  advantage  of  his  ignorance  of  market  conditions  to 
beat  down  prices.  The  follo^.-ring  extracts  taken  from  affidavits  submitted  in 
the  Hardwood  Case  are  illustrative: 

N 

Affiant  maintains  no  sales  organization  and  markets  his  products 
largely  to  wholesalers.  **For  this  reason  the  sales  reports  of  the  @pen  Com- 
petition Plan  were  of  especial  value,  for  the  reason  that  the  wholesalers,  from 
the  natvire  of  their  business,  are  constantly  in  touch  with  the  market,  and  when 
purchasing,  naturally  desire  to  buy  at  as  low  a fig-, ire  as  possible.  These 
sales  reports  were  a check  against  their  statements.  By  virtue  of  these  report?, 
hevas  enabled  to  get  nearer  the  market  price  from  the  wholesalers.  **Before 
introduction  of  the  Open  Competition  Plan,  certain  unscrupulous  middlemen  made 


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r ■ r-tr>,v'v  sa.iX’l  a.'I a»qv  t4v  jo 


, 


a practice  of  misrepresenting  the  prices  at  which  they  had  purchased  lumher  from 

neighboring  producers,  and  thereby  forced  the  small  producer  to  maJce  .an  abnor- 

ira.lly  low  price.  This  practice  has  been  done  away  with  by  the  Open  Competition 

Plan.  In  the  opinion  of  affiant,  this  is  one  of  the  chief  benefits  derived  from 

the  Ooen  Comoetition  Plan,  especially  as  to  the  small  producers,  who  are  not  in 

1 

touch  with  the  market.” 

Another  small  operator  attested  to  the  follov/ing: 

"As  an  operator  of  a comparatively  small  mill,  which  maintains  no  sales 
force,  he  found  these  rsTjorts  and  letters  of  great  value  to  him.  Previously  to 
belonging  to  the  Association  he  was  Largely  at  the  mercy  of  the  wholesaler,  to 
whom  he  has  always  sold  the  bulk  of  his  production.  For  instance,  in  1919  his 
concern  sold  3,351,000  feet  to  wholesalers  and  1,733,000  feet  to  ccnstimers.  Be- 
fore joining  this  association  and  receiving  these  reports,  in  June  of  1919,  he 
sold  first  and  second  quartered  white  oak  to  wholesalers  for  $88.00  per  thousand 
at  the  mill,  or  $105,00  per  tho-jsand  in  Boston.  For  which  these  wholesalers  ob- 
tained from  the  consuners  the  prevailing  price  of  $250.00  per  thousand.  This 
condition  of  ignorance  of  market  conditiens  worked  a hardship  on  him  and  was  of 
no  benefit  whatever  to  the  constuning  public,  the  wholesaler  reaping  all  the 
profit  on  the  transaction. 

"That  a small  producing  mill  without  a sales  organization  cannot,  under 
present  conditions,  intelligently  do  business  unless  through  some  association  or 
other  means  that  keeps  him  in  touch  with  market  conditiens.  In  his  opinion,  the 
Open  Competition  Plan  has  been  of  great  benefit  to  the  small  producing  mills 
and  has  worked  no  hardship  whatever  on  the  consiiming  public,  but  has  resulted  in 
reducing  to  a considerable  extent  the  abnormal  profits  obtained  by  the  wholesalers 


1. 

Affidavit  of  J.  M.  Morgan,  quoted  in  Argunent  of  L.  C.  Boyle  before  the  U.  S. 
I Supreme  Court,  American  Col.  & Lum.  Co.  vs.  U.S.,  p.  70. 


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213 


and  middlemen  generally.” 

One  small  operator  wrote  to  the  Manager  of  Statistics; 

"From  my  e:merience  as  a small  manufactiirer,  this  (sales  report)  is 

one  of  the  most  important  services  the  Association  has  given  me.  Before  he- 

coming  a member  of  the  Open  Competition  Plan,  I know  I have  sold  a good  many 

cars  of  1-umber  $3.00  or  $4.00  -under  the  market  to  wholesalers,  upon  which  they 

2 

have  reaped  the  benefit  of  my  ignorance. " 

The  testimony  here  given  is  typical  of  many  other  sworn  statements  sub- 

miitted  by  small  manufacttirers, -all  of  which  point  to  the  conclusion  that  the 

chief  fi'nancial  benefit  accrued  to  the  small  maimifacturer,  participation  in  onen 

price  work  enabling  him  to  e^act  prices  nearer  to  the  general  run  of  the  market. 

The  prices  received  by  the  larger  producers  were  no  higher  than  those  received 

by  competitors  who  w'ere  not  members  of  the  Open  Competition  Plan.  As  previously 

3 

stated  numerous  buyers  attested  to  this  fact. 

Incidentally  it  may  be  remarked  that  in  so  far  as  open  price  work  does 
enaole  some  prod'acers  to  secure  prices  which  ^projdmate  more  closely  the  so- 
called  market  level,  to  tliat  extent  prices  become  more  -unifortTi  that  they  rrould 
othenvise  be. 

Respecting  the  influence  of  open  price  activity  on  prices,  the  follow- 
ing s-umming  up  is  made  by  way  of  recapitulation: 

1.  Although  theoretically  members  of  open  price  associations  can  t ake 
advantage  of  their  superior  loiowledge  of  niarket  conditions  to  exact  higher 
prices  from  the  buyer  than  would  be  possible  if  the  latter  were  equally  well 
infoniied  or  open  price  work  werenon-e xistent,  yet  in  practice,  it  is  thought 


1.  Affid^t  of  J.  W.  Bailey,  nuoted  in  Argument  of  L.  C.  Boyle  before  the  U.  S. 
Supreme  Court,  American  Col.  & Lum.  Co.  vl.  U.  S.  ,p.  44. 


2. 


3. 


Bohlson,  H.  G.  , Record,  Aiierican  Col,  & Lum. Co.  v's.U.S.  Vol.2.No.  1138. 
See  p» 147 . 


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214 


that  in  moat  industries,  at  least  of  the  larger  type,  buyers  siiffer  no  such  dis- 
advantage, for  the  reasons,  first,  that  the  effectiveness  of  open  price  associa- 
tions is  con^^romised  by  defections  in  the  open  price  system  itself  and  by  slack- 
ness in  its  manner  of  use  by  members;  second,  that  the  sphere  of  influence  of 
open  price  educational  activity  is  in  most  cases  too  limited  to  overcome  the 
influence  exerted  on  prices  by  (1)  outside  competitors,  (2)  potential  competi- 
tion from  substitutes  or  new  capital. 

2.  Although  open  price  work  probably  has  not  operated  to  raise  the 
general  run  of  market  prices  extant  in  the  industry  as  a whole,  in  certain  in- 
dividual instances  better  prices  have  been  secured,  these  inuring  in  the  main  to 
the  smller  produicers,  who,  prior  to  their  entry  into  open  price  work,  were  sel- 
dom able  to  exact  prices  recognized  to  be  the  current  mrket  rates,  bxit  found 
themselves  more  able  to  do  so  in  conseq;'jLence  of  the  better  acquaintance  with 
market  conditions  derived  from  membership  in  the  open  price 

3.  Bates  are  not  likely  to  attain  any  degree  of  uniformity  (except  in 
so  far  as  the  higher  prices  secured  by  low  priced  competitors  through  participa- 
tion in  open  price  work  contributes  toward  such  uniforrrdty),  unless  members  ex- 
ercise a controlling  influence  over  the  Industry,  in  which  case  uniformity  may 
be  attained,  not  through  freer  competition  ensuing  from  a competitive  situation 
in  which  both  buyers  and  sellers  are  conscious  of  all  influences  affecting  de- 
niand  and  supply  and  therefore  awake  to  their  interests,  as  is  held  in  contem- 
plation bj'-  the  law  of  supply  and  denand,  but  through  the  very  ignorance  of 
buyers,  re  stilting  in  docile  acceptance  of  a rate  made  more  or  less  uniform,  if 
not  by  direct  agreement  among  members,  perchance  by  the  power  of  suggestion, 
emanating  from  leaders,  perhaps  in  the  form  of  precept  or  example. 


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215 


CHAPTER  X 

OPEN  PRICE  ASSOCIATIONS  AND  THE  PUBLIC  WELEARE 

In  estimating  the  value  of  the  open  price  association,  the  all  im- 
portant question  is,  what  influence  does  its  operation  have  on  puhlic  welfare? 

Is  it  likely  to  prove  a detriment  or  a benefit?  T/hen  one  reflects  tlia,t  the 
open  price  movement  is  but  in  its  infancy,  and  that  therefore  the  fund  of  ex- 
perience and  data  is  necessarily  incomplete,  it  seems  indiscreet,  indeed,  to 
naie  apcsitive  assertion  one  way  or  the  other.  Despite  the  inconclusive  character 
of  data  based  on  observation  and  e jpei-ience,  perhaps  a consideration  of  such 
of  the  theoretical  aspects  of  the  problem  as  suggest  themselves  will  be  helpful 
in  seeking  out  a solution. 

On  the  assiurption  tliat  competition  in  business  is  the  condition  of 
trade  most  conducive  to  public  welfare,  does  open  price  activity  give  promise  of 
ushering  in  a regime  more  akin  to  the  ideal  kind  of  competition  held  in  con- 
templation by  the  law  of  su.p]3ly  and  demaitd,  or  is  it  likely  to  place  obstacles 
in  the  path  of  an  approach  to  freer  competitive  conditions?  Mr.  Eddy  evidently 
thought  that  in  creating  the  open  price  system,  he  was  giving  the  commercial 
world  an  instrument  calculated  to  bring  about  a new  comnetitive  regime  v/herein 
the  much  sought  after  stability  of  business  conditions  would  be  achieved 
through  intelligent  conrcetition  replacing  ignorant  and  secret  competition. 

The  conception  underlying  his  plan,  to  mt,  that  knowledge  is  the  essence  of 
competition,  Mr.  Eddy  undoubtedly  believed  to  be  an  original  contribution  to 
economic  thought,  whereas  the  truth  of  the  matter  is  that  econondsts  in  their 
formulation  of  the  law  of  supply  and  demand,  have  hypothicated  their  law  of 
competition  upon  the  very  ass^'amption  that  buyers  and  sellers  possess  enoxigh 
knowledge  of  the  factor#  influencing  the  competitive  situation  to  make  them 


^ ■ ' *'  • ' ■'  ....'-■"  ^ 

••  •*--  • ^'  ‘V.-iii 

'*  /'■!<-■  *■  j 

. ,XX.,«(«  ,a<a»si,b«,.a-  vsh5  o*^  j,I  ‘ '* 

•« 

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i.'SflX»a  ,rf  M.,i»X)}‘,^  .4J  la  '■&*•, C-* 

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■;V  iX  •a.rtW  BJ  XJlj;?®Pc,  v»<f.X  Mi’S} 

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OJ  «3i&u;ai,  *j»,ie:;ge*x 

'.•.•  “ '*i.r  *^'  “aW  -'*  " '"'  • 


216 


1 


conscious  of  their  own  interests  as  bargainers.  Not  only  is  the  concept,  that 

knowledge  is  the  essence  of  competition  not  original  with  Mr.  Eddy  but  his 

statement  that  tiue  conrostition  will  ensue  "only  where  there  are  two  or  more 
1 

competitors  competing  under  conditions  that  enable  each  to  l<now.  and  fairly 
judge  what  the  others  are  doing"  is  untenable  for  the  law  of  supply  and  demand 
assumes  that  all  parties  to  a competitive  situation  are  well  enough  informed  to 
be  capable  of  acting  in  accordance  with  their  interests.  "All  parties"  include 
the  buying  class  as  well  as  the  selling  class.  Obviously  any  concept  of  com- 
pei^ition  whiun  leaves  out  of  consideration  the  buying  class  is  utterly  inadequa 
as  a solution  to  the  problem  of  securing  true  competition.  The  acceptance  of 
Mr.  Eddy' s point  of  view  would  mean  an  endorsement  of  the  idea  that  a nearer 
approach  to  ideal  competitive  conditions  will  ensue  if  the  salient  facts  of 
competition  are  made  known  to  sellers,  leaving  buyers  to  continue  in  a state  of 
comparative  ignorance.  The  mere  statement  of  this  proposition  convinces  one 
of  its  fallaciousness.  Obviously  buyers  can  not  hold  their  own  in  their 
capacity  of  bargainers  if  sellers  are  well  informed  and  they  are  not.  In  as 
much  as  the  open  price  plan  as  devised  by  Mr.  Eddy  embodies  tltis  fallacious 
concept  and  is  heralded  by  him  as  a practical  scheme  for  ushering  in  true  com- 
petition, it  also  must  share  the  same  criticism.  Neither  the  open  price  plan 
nor  tne  concept  upon  which  it  is  founded  give  promise  of  solving  the  problem 
of  securing  true  conjietition.  The  plan  is  devised  from  the  point  of  view  of  the 
seller,  the  purchaser  having  no  part  to  play  in  its  organization.  All  that 
can  oe  claimied  for  it  is  that  it  gives  promiise  of  offering  some  redress  to  one 
inaustiial  class,  namely  sellers,  particularly  sellers  who  are  manufacturers. 


1.  Mr.  Eddy  uses  the  term  "conpetitors"  in  its  commonly  accepted  meaning  of 
denoting  sellers  in  competition  with  each  other  for  the  cixstom  of  the  buyers. 


<-h 


; ir»«  ..  i-r!  1 • 


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:■  '■£■.,  ^ .-..'J  i,tj 

>.  « A...  iu  ^Vk'CB  S ' ‘X'/JSi  svj-*;  ji  : 

ur,r:3  -:.!  - ; .•  r.:n..  tor.  at  i«v;nf  t:5jolv*-0  .tc 

• • . - ! ■-  ”I  'a  • . ? . i-.  H 0 . * . 


1 

■i 


. . .i  . . 

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viooeiP.  ; ’«.tl 


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...  vT  .-J^  ..C.  Jv'..  ....  - ip'^j  i.,4,  .-i;,;.-, 


■'  k ; 


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f.v.  '•■j  iw at".  c-TKX  _:;i. 


iv  It  .'T..-:tj  ’i-  ♦;  ,r.  'i.i  *i 


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217 


Prior  to  their  entry  into  open  price  work,  manufacturers  were  no 
doul3t  the  chief  sufferers  from  the  ills  attending  the  regime  of  competition 
conducted  in  ignorance  and  secrecy.  Buyers  were  at  least  always  able  to  as- 
certain with  some  degree  of  accuracy  the  character  of  current  market  rates  by 
calling  for  numerous  competitive  bids,  but  manufacturers  had  to  rely  for  their 
information  either  upon  the  statements  of  buyers  or  upon  those  of  salesmen. 

The  small  manufacture i’  without  a sales  organization  had  practically  no  other 
source  of  information  than  that  coming  from  the  buyer.  Botn  cuycr  and  saxes- 
man  have  been  interested  in  deceiving  the  manuf v.cturer,  into  thinking  tliat 
going  rates  are  lower  than  they  really  are.  The  buyer  has  practiced  deception 
in  order  to  "beat  down"  prices;  the  salesman  in  order  to  excuse  his  action  in 
ma^rcing  easy  sales  at  abnormally  low  prices,  his  false  plea  being  that  certain 
alleged  low  .c[aotations  made  by  competitors  have  had  to  be  met. 

Having  once  associated  themselves  in  open  price  work,  however,  the 
mastery  of  the  competitive  situation  falls  to  the  sellers,— at  least  in  theory, 
for  they  have  now  come  into  possession  of  market  knowledge  which  is  superior 
to  that  of  buyers.  In  practice,  hov/ever,  sellers  thus  organized,  find  it 
difficult,  if  not  impossible  to  make  capital  out  of  their  superior  educational 
facilities,  either  because  the  open  price  system  fails  to  function  properly, 
or  because  members  do  not  represent  a sufficient  percentage  of  the  prodxictive 
capacity  of  the  industry  to  give  them  a controlling  influence  over  price 
matters,  or  because  potential  and  indirect  competition  keep  prices  close  to 
pre-ezisting  levels.  How  powerful  these  deterring  influences  affi  can  only 
be  determined  from  observation  and  e::^erience  carried  on  over  a pei'iod  of 
years.  The  instances  on  record  where  individual  memoers  have  succeeded  in 
bettering  their  prices,  seeni  confined  to  small  producers,  who  prior  to  their 
entry  into  open  price  work,  v/ere  unable  to  exact  the  best  nvarket  prices  but 


^ ■ .J  J.  ■ 

' '“3  vits  naJ 


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:-'■  V.',T  .ci*^:rro«-r  ^ 


xi,  |i 


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f - -r  ..  • 


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' , f- 


rt'  o 3 r ; vp*  iuicf,s.:so^  m--:, 

r*  j •»  i - #*  / ^ 

*•  • -“•'  ' • •■  -■-■^-  »---o 

’ -‘■'  :r  Iry:;  • r-: 

vc.  •...,*;^  t •-  . ».ri  v:cco  woss  lo: 

<’!  .,  ..  . T y , t-' i -T  . ^.-^r 

A. •;*;:,  : C'i...  .'••  . -•..;  ..;A  ■u>v  . ,*»! 

■•;.--,.i-  . ,,..•  ■-  ^ . .■.■.,tf.-.»j  ,,j 

' •-7-  V . - -V  ,.  - ...  ^,... 

. 3 ij  ' - i • I 

.4  4 


■-tvj  t.-u  ;;a.0®i«o  ao , ■.  '9H8M 

^ ^ -979  a-  ln,.c  .r..  ; • . •.  • h,:ctlsn9i 

bt^  a..^w!  ..  i.  ,j...cy  .■■vtiiltAi  L lo  -1 1 ; y,."J 


0.1-. 


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94bipi  ^ d :««rf 

k'.. 

...  '•" 


ti  ~ 


ir  r 


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It'C'il'J  f.',’,  : / j.id"  V 


218 


who  subs© qiisntly  ffu.cc6eded  in  utilizing  open  price  inforrnatioii  to  secure  for 
themselves  better  prices. 

It  is  not  probable  that  the  prablic  welfare  is  prejudiced  by  the  fact 
that  small  producers,  by  availing  themselves  of  market  information  put  at  their 
disposal,  are  enabled  to  emct  rates  more  nearly  approximating  those  recognized 
as  the  current  rates.  In  fact  it  is  probably  nearer  the  truth  to  assert  that 
the  public  welfare  is  promoted  thereby.  The  public  suffers  a large  loss  of 
specialized  capital  and  labor  skill  every  year  by  reason  of  the  numerous  bank- 
I ruptcies  that  occur  among  small  producers.  These  bankruptcies  are  not  always 
brought  on  by  the  inability  to  produce  as  efficiently  as  larger  competiooi's, 
but,  as  often  a,s  not,  they  are  the  consequence  of  a failure  to  properly  gauge 
market  conditions.  YJith  adequate  market  information  at  their  disposal  they 
are  less  apt  to  make  the  mistalces  which  so  often  lead  to  ba/xYkruptcy.  Another 
important  consideration  is  that,  in  so  far  as  prices  of  small  producers  are 
placed  on  a mors  even  keel  with  those  of  the  larger  competitors,  the  danger  of 
monopoly  ensc-ing  in  consequence  of  ruinous  price  cutting  is  materially  decreased. 
Those  who  are  in  favor  of  the  survival  of  the  small  business  institution  may 
find  considerable  comfort  in  the  thought  that  open  price  work  makes  the  small 
business  man  better  able  to  hold  his  own  with  his  larger  and  more  powerful 
competitors. 

The  chief  danger  of  jeopardizing  the  public  interest  comes  when  an 
open  price  association  enjoys  a controlling  influence  in  the  industry  with 
which  it  is  identified.  It  is  under  such  a circumstance  tltat  attempts  to  en- 
hance prices  directly  or  indirectly  through  curtailment  of  produ.ction  carry 
the  best  prospects  for  successful  accomplishment.  Success  or  failure  in  en- 
hancing prices  probably  would  depend  mainly  upon  tne  effectiveness  of  the 
restraining  influence  exerted  by  potential  and  indii’ect  competition.  It  is 


-Si 


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♦•yi?  VtdadjtHii; 


9i  d::prtt  td^  xil  f^x»-.w'mS‘:t  te-w.. 


^ ^ * s'lalljM  ol/d/rq;;^  a<?y  •\d'»Tdrfi.  Xa^^aadiiqr  «*,  aar«l;XW  OtX<f|n^ 


v'f 


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o^w»I^  lofl  wXA  imlKiy  .4Ti^t^xrii<^t(J;  ll^j^  ]$^)Ouuit  xfwiy6 


I'vJ  ’ k-  B a'^ 


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' ^-  ''3  •■  * ' ''  A ‘’®‘  <Wf  * ' ' ' ■■"‘‘If  S' 

ir-sr^cn^  u’XirtLA  ^ to.  ^ 

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^ , oxa  !.;ie!ii  s,«  TC*’i_o4^  SX  ,;r^j  »i  (p&i^xi^al&Xi^KXi 

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to  tajjA  -la^kiAX  ef(3  to  c>t(ad./  XasW  j^ya  •^dui  a»  xto  iaj 


ei  8.a.i334:s  «ij<£>li-iAfy  to-' 3|t *■  >yfe (y. 

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.\ 


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; #7  ■•'.■*  . ; ' -''' ' ' j 

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"A^'3'  .'._’A.-.  if  tfif- 


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^aixfldtr  *i  .*!•  eiV*i'4iTxd^>  I 

, ■ ' ‘H  I "» 


ai?X4&--X'iW4y  to  id-  »ftdltQ,  dd.a^  Ij^, 

-i;«  ai  d-ic/toi  ‘ic- eaaj.ocC  .4!x®jitl«i;£^p«d*tsj6  X«idaafiOi?»  lot- «;^s»w«cia  toad  *<f' 

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■■'  /v  V-  ...  - ' :;  ^ - t 

.-.■  'A  \ • ^-  ■ \ \ ' ■; 

'V.  '-  * »;  SmJ 


219 


conceiva'ble  that  a considerahle  margin  of  increased  profit  might  he  secured,  if 
not  permanently,  at  least  for  Sictended  periods  of  time,  before  new  capital  would 
he  attracted  into  the  industry  or  a resort  made  to  the  use  of  substitutes.  Ihese 
enhanced  prices  mi^t  ensue  solely  as  the  result  of  the  advantage  enjoyed  by 
members  over  buyers  in  the  way  of  superior  knowledge  of  market  conditions^no 
resort  to  collusion  being  made;  ho^vever,  the  temptation  to  pool  knov/ledge  in 
such  a way  as  to  accoirrplish  price  enhancement  by  means  of  collusion  v/ould  be 
exceedingly  strong,  as  is  admitted  by  the  staunchest  defenders  of  open  price 
plan,  the  inducement  being  especially  great  by  reason  of  the  fact  tlcs^xt  members 
would  be  av;are  of  their  controlling  influence  in  the  industry.  Collusion  might 
be  achieved  in  a manner  so  subtle  a.s  to  defy  all  detection  by  officers  of  the 
law. 

As  far  as  the  writer’s  observation  goes,  no  open  price  association 
has  as  yet  succeeded  in  obtaining  a controlling  influence  in  any  of  the  important 
induistries.  A few  instances  are  known  where  small  industries  are  completely  with- 
in the  control  of  an  open  price  association,  but  it  is  thought  that  no  large  in- 
dustry is  sufficiently  dominated  by  any  o^jen  price  association  to  give  one 
ground  for  believing  that  the  course  of  prices  for  the  industry  as  a whole  has 
been  materially  affected  by  its  operations.  The  obstacles  that  militate  against  I 
the  rapid  growth  of  membership  in  these  associations  are  sufficiently  serious  | 
to  make  one  wonder  if  they  ever  can  succeed  in  gaining  a controlling  influence 
in  the  larger  industries.  Hie  open  price  raovement,  however,  is  very  young. 

The  future  may  tell  a different  story. 

To  Summarize,  then,  the  leading  thoughts  which  suggest  themselves  with 
reference  to  the  value  of  open  price  associations  as  viewed  from  the  standpoint 
of  public  ';?eliare,  we  find,  first,  that  they  give  no  promise  of  solving  the 
problem  of  achieving  true  competil,ion,  as  is  maintained  by  Mr.  Eddy  and  his 


‘ < ',y 


■ti'  ' 


*■■  ■ ' r • ■ -,  ‘ "'^ 

iJ-rl>-^;V.<r«oS»V-,«t(^  ic  »oir. 

I^t/r  .tv^irrlftcn  » tu>  iiJi-w  no;xwiu«t.‘  Juij  oioiHt-u^'ha’ ii  P 


Xi  i«wc»  -io  Jimw%r;  i«  v/.Xot  ^-u,,  i«o*fa,  ! 


w-  •; 


^ i ■ ^-Hfcocsixt^ » m ^{itn* 

5*  — ' ^ ^ > ' '■ 

tairt*7  fli^tO  ^0  *4'<'  *a 

W-  ' '■  ^ * ■ * - 


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lo  r.onj^^  ?^S  4l.'«s  ;ti'X4lo«<i«6  ^oiidC  $d4^<y.OMl^ 

- • ■'■  . . - ^ - *!!  . .^-  ■ . 

■ rfiilttiiSoO  f -*4^  ui  ^ MoonsrX^t  %ai  i.Jj^rSr  x-  * ’i  lirf^  )fco  'ixm ' 

‘ , . ’ - ;'''vi\- 

^..,  '^4  4'-  oV  4i.'t  4tJ4ot  08  1 a A itl - fitf’ 


■•'i: 


;/  -4t  .’  • 


. 3...V 


wt.  ',</cfr^  i oiJarjar.fe  r’'£->Jiif»  ,jaV  *«-«■ 


w<#  1©  •jaA  ni  ^ tad 


(ij  t-*.''*ri<iK«o  rtji  ifwn'  .i»<>m:  w»^a'  .aih«E.I 


, . . - ■'  - ^'-  - V'  ■ . „■  „ '%■ 

’^X  &l5't4l  rfr  ^tS^^dc  et  /i  r^'Oi^’l-Jb'^ii'ji  '4‘ai7?(:'%r»^'0  ne  3to  Xoe*«ytf^'‘'iMfj'  «i 

' » . ■ '-p  ,■  ' ’ Triu  ""  ' 

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and  « mt  x^fta&itl  tdi  icl  nmtintCi  adX 

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» ■ ..  , * ■■  '■.  ■ 1 '‘i'o 

^ ef4»:t6oi?.  :'i;c^*j6  <.»0ifJ  isi  qmt.-fstins  Xo  eitfjr 

t»5iA<i^r^i  ^nilXc^rr-jii©  A lJ  i>©f«2i»i^  4’^ Oi  /t »*¥»?. 

t^v  %t  ,'r©re<w5^1  - ,j.-'‘-  ■*.'a^  idLS  txfa 


•5 


<^»,’  ‘ft-  _ „•■•■  ',  '■”  “ r? 

•X^O?*  4 IX«?  ©Tir^xiS  eaf®' 

j ' 


\( 


i}»ir«  5it  % x»  ‘.o*  littriifct  *ait- oi 

■■''  ■'  '■'^  . ■•■  "’  . ffl  ■ . ' ■ ,;J 

^ ^ ©vis  ^afc>; 

:'  * , ,-'' ' - ■ ' ■■•"  ' '* 

tru  pi/<  .yJ  ©xnci 


/ .. 


'■4  »'* 


220 


follOTxers;  second,  that  they  do  offer  soine  promise  of  redress  from  the  evils 
attendant  upon  the  old  competitive  regiine  of  secrecy  and  competition,  not  for  j 
buyers,  hut  for  sellers,  particularly  those  of  small  productive  capacity;  that 
in  the  event  of  a future  increase  in  control  and  influence  over  industry,  they 
may  wield  a power  detrimental  to  the  public  interest. 

Assuming  that  future  observation  and  e:>qperience  verify  these  con- 
clusions, what  deductions  may  be  made  regarding  the  proper  destiny  of  open  price 
work?  One  consideration  is  paramount;  irreroective  of  v^hether  it  is  found 
feasible  or  not  to  permit  associations  of  business  men  to  engage  in  open  price 
work,  the  work  itself  must  not  be  abandoned.  The  information  side  of  business 
is  rapidly  becoming  an  e:act  science.  The  trend  of  the  times  is  in  the  direction 
of  greater  insistence  upon  the  accumulation  of  precise  and  accurate  business 
information  of  a statistical  character.  A mere  statement  that  business  is 
good  or  business  is  dull  will  not  for  long  be  accepted  as  a sufficient  criterion 
of  the  trend  of  bvisiness  conditions.  Manufacturers  as  a class  will  not  be  long 
in  insisting  on  hirving  at  their  finger  tips  actual  figures  showing,  for  instance 
the  increase  or  decrease  in  production  from  a known  standard;  the  increase  or 
decrease  in  unfilled  orders,  .end  the  increase  in  raw  materials  and  finished 
product  on  hand, — all  this  in  order  that  they  may  have  an  index  to  the  volume 
of  trade,  other  things,  manui“acturers  are  coming  to  les.m  that  in  order 

to  avoid  to  the  greatest  practicable  extent  the  periodic  disturbances  to 
production  that  corae  from  unrestrained  over  e35)ansion,  now  recognized  to  be 
largely  due  to  a general  lack  of  broad  insight  into  business  conditions,  they 
must  possess  themselves  of  inforrmition  of  the  clraracter  ei'pounded  above. 

It  behooves  the  G-ovemment  to  come  to  a full  recognition  of  the  fact 
that  it  is  a mistaken  public  policy,  and  is  also  utterly  futxle,  for  it  to 
attemp>t  the  task  of  forcing  business  men  to  compete  in  ignorance  and  secrecy. 


* 

Os-s 


fcliKtja f>  ■ t VUi'WtiBdiWliafcCTr  jr-y  • ' 


-i 


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^5^  ^Xiisa  io<«»Oi.;  xl^i^i^ZAq 

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03  3’^tbt  ,eX;^r^  o»f*  si  ,Koi/W  ol/bic/c,  £ bl  32  vrjieJ^  ;, 

•V5^  , ' '-;  ••  ‘t^  ‘'. 

^‘■‘zjt9  tm  »»aAro£Qi  tu  Ov**^»do  aj.t/ixst-  Afjiim'?  lo  iire> 

"i^v  ■ • ■ ■ ^ 


Our  hope  for  improving  competitive  condition 
to  conduct  their  hnsinesses  like  moles,  "but 


s lies,  not  in  forcing  ousiness  njen 
in  giving  them  all  the  enlightenment 


possible  as  to  the  factors  that  influence  the  competitive  situation.  The  open 
price  movement  has  sprung  into  existence  in  response  to  the  growing  desire  of 
business  men  to  govern  their  business  operations  intelligently  in  the  light  of 
existing  business  conditions.  They  have  tried  to  do  for  themselves  what  the 
Government  does  in  a small  way  for  the  farmers.  At  great  expense  to  itself,  the 
Government  issues  crop  reports  to  the  farmers  for  the  eaoress  purpose  of  eriaoiing 
them  to  market  their  products  more  intelligently.  Since  it  is  clear  that  an 
approach  to  more  wholesome  competitive  conditions  must  come  through  the  wider 
dissemination  of  more  ejact  knowj.edge  of  the  factors  influencing  business  con- 
ditions it  seems  ill-advised  and  even  unfair  to  force  associations  whose  efforts 
are  dedicated  to  these  purposes  to  cease  their  activity  on  the  ground  that 
prices  hf.ippen  to  be  increased  thereby, — unless  the  Government  is  prepared  to 
assume  the  resx>onsibility  for  seeing  tliat  open  price  work  of  equalljr  efficient 
character  is  carried  on  by  some  other  less  objectionable  agency,  either  private 
or  public.  To  put  a ban  on  open  price  activities  without  offering  something  in 
their  stead  would  be  to  discourage  a valuable  incentive  directed,  toward  the 
achievement  of  greater  efficiency  in  bargaining.  The  greater  the  development 
of  efficiency  in  bargaining,  the  nearer  is  the  approach  of  actual  competitive 
conditions  to  ideal  competitive  conditions. 

If  future  observation  and  experience  point  to  the  conclusion  that 
members  of  open  price  associations  are  securing  too  liberal  returns  on  their 
investment  in  business  education,  at  the  e^Exonse  of  buyers'  ignorance,  the 
proper  solution  lies,  not  necessarily  in  prohibiting  them  from  engaging  in 
open  price  activity,  but  in  ^^ddening  the  sphere  of  open  price  influence  so  that 
not  only  members  of  open  price  associations  may  receive  the  benefit  of  it  but 
also  all  others  who  have  a direct  interest  in  the  competitive  situation.  V\'ith 


% 


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■-.I-  ...  ...(■,_ 


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9^c  i an^*i  9^^  aviat(#o  vi»  \ipa  toa  - 

./■'  .•  ..  . . . ..  ' ■ i' ' ' ‘ ■ '•■■■ 


■ ' . ■ •-'''  ' ' * ' ■ *'V'  ."■  ■ .t'^ 

.itifl3MS!iU  mia  sri  fttnu^fa!;  tf©<rxij&  '4  ©vad  rnKUfi  SL»  ewia  ‘ 


it ., 


222 


all  ‘bargainers  eqnally  well  equipped  v/ith  scientific  "business  inf orroation,  no 
gro'up  of  men  associated  for  the  purpose  of  disseminating  information  of  this 
character  among  its  mem'oership  would  "be  in  a position  of  dominance  in  any  in- 
dustry, for  they  no  longer  would  possess  a monopoly  of  such  infonmation.  If  the 
necessary  machinery  could  'De  constructed  for  putting  "both  "buyers  and  sellers  in 
every  industry  in  possession  of  all  information  necessary  to  make  them  intelli- 
gent bargainers,  one  of  the  most  serious  causes  of  friction  of  the  many  that  now 
prevent  actual  competitive  conditions  from  approaching  ideal  competitive  con- 
ditions will  have  been  eliminated.  Only  then  will  the  much  maligned  law  of 
supply  and  demand  be  afforded  a su.fficient  opportunity  to  demonstrate  its  worth 
before  the  world. 

It  is  not  within  the  scope  of  this  dissertation  to  consider  the 
practical  aspects  involved  in  extending  the  sphere  of  open  price  activity  beyond 
its  confines.  No  doubt  a proper  solution  of  the  problem  of  extending 

open  price  activity  into  every  industry  in  such  a way  tliat  all  who  are  interested 
may  profit  thereby  can  best  be  achieved  by  a painstaking  and  exhaustive  in- 
vestigation conducted  with  facilities  for  research  such  as  no  one  individual  is 
likely  to  possess.  Only  the  Government,  it  is  thought,  has  command  of  the 
facilities  necessary  to  make  a successful  investigation.  The  chief  question 
on  which  such  an  investigation  must  seek  to  come  to  an  intelligent  decision,  is 
whether  the  function  of  collecting,  compiling  and  disseminating  business 
statistics  should  be  left  in  the  hands  of  associations  of  business  men  in  each 
of  the  ind^istries,  without,  however,  confining  membership  to  one  industrial 
class  as  is  now  the  case,  but  expending  it  to  include  the  class  of  purchasers; 
or  whether  this  function  should  be  turned  over  to  the  Government  to  administer. 

The  burden  of  the  argument  in  this  study  appears  to  uphold  the  latter 
procedure  as  offering  the  greater  assurance  for  success,  at  least  as  far  as 


'isx.' ' OS' 


ww 


h 


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223 


conducting  open  price  work  in  the  larger  industries  where  buyers  and  sellers  are 
relatively  numerous  is  concerned.  Even  making  allowance  for  the  fact  that  the 
open  price  movement  is  young,  the  results  achieved  in  one  of  the  largest  indus- 
tries, the  lumber  industry,  do  not  hold  out  much  promise  for  the  future.  We  have 
seen  that  even  in  the  most  successful  association  of  the  many  in  the  lumber  in- 
dustry doing  open  price  work,  namely  the  American  Hardwood  1/lanufacturers'  Associ- 
ation, it  was  found  well  nigh  inpossible  to  secure  sufficient  cooperation  from 
coirpetitors  to  make  the  plan  successful.  Ikrly  in  1919,  after  an  existence  of 
about  two  years  as  a consolidation  of  two  associations  which  had  existed  for 
several  years  previous,  the  membership  had  not  yet  reached  the  four  hundred 
mark;  thousands  of  snail  mill  owners  were  not  members.  In  1919  the  membership 
controlled  but  twenty^eight  percent  of  the  total  hardwood  production  of  the  in- 
dustry. Membership  was  con^jrlsed  mainly  of  the  larger  producers.  The  small 
mill  owners  were  the  very  ones  most  in  need  of  business  information,  for  as  a 
rule  they  had  no  sales  organizations,  and  in  their  isolated  locations,  they  had 
poor  means  of  keeping  in  touch  with  the  market.  Moreover,  even  a large  percent- 
age of  those  who  did  become  members  showed  themselves  very  dilatory  in  fTimishing 
the  information  called  for  by  the  Iv^nager  of  Statistics.  Obviously,  under  these 
circumstances,  such  statistics  as  were  reported  by  members  did  not  give  totals 
which  could  be  considered  representative  of  the  hardwood  industry  as  a whole. 

It  is  quite  conceivable,  not  to  say  probable,  tliat  an  investigation  into  the 
workings  of  c^en  price  associations  in  the  other  large  industries  where  they  are 
now  in  operation,  v/ould  reveal  conditions  similar  to  those  found  in  the  lumber 
industry.  The  writer  is  convinced  that  there  will  always  be  a large  percentage 
of  business  men  in  every  industry  who,  for  one  reason  or  another,  will  not  par- 
ticipate in  open  price  work  conducted  by  a voluntary  organization. 

In  order  to  secure  statistics  sufficiently  representative  of  each  in- 
dustry to  be  a reetl  index  to  the  trend  of  business  conditions,  it  would  seem 


« « r brui  i '.iiif.’uU  adJ  :J  s^xcta'  ssii.  r.tn_  ■ - i'»90iiio& 

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. taijrf  JC  Xriwi  X".-0'»  i!-  *>... 


224 


necessary  to  introduce  an  element  of  compulsion  into  the  situation,  such  as  only 
the  Government  could  successfully  "bring  to  "bear.  Business  men  could  "be  recplred 
to  furnish  vital  "business  statistics  to  the  Government  much  in  the  same  manner 
that  it  is  made  comjiulsory  to  furnish  statistics  to  the  Census  Bureau. 

One  Government  agency  evidently  believes  it  feasible  as  well  as  needful 
to  obtain  accurate  and  precise  data  pertaining  to  market  conditions  in  each  in- 
dustry, for  the  Federal  Eeserve  Board,  working  throughthe  Federal  Beserve  Banks, 
is  establishing  a reporting  system  for  the  purpose  of  securing  from  representa- 
tive firms  in  each  of  the  more  inpjortant  lines  of  industry  certain  figures  re- 
lating to  production,  stocks,  unfilled  orders  and  the  like.  Its  main  purpose 
in  gathering  tills  information  is  to  use  it  as  a basis  for  making  a scientific 
study  of  bank  credit.  However,  as  an  inducement  to  manufacturers  and  others  to 
contribute  information,  those  who  submit  the  required  reports  will  be  sent  the 
figures  that  are  compiled  for  their  particular  lines.  The  returns  received  for 
any  given  line  are  to  be  coirpiled  and  published  in  the  form  of  percentages,  giv- 
ing conditions  in  the  industries  as  a whole,  so  as  to  avoid  the  possibility  of 
disclosing  information  relative  to  any  particular  firm,  presumably  of  a confi- 
dential nature. 

Obviously  the  scope  of  the  work  of  this  Board  is  limited,  and  in  con- 
sequence its  effectiveness  is  inpaired,  by  reason  of  the  fact  that  data  are  to 
be  secured  only  from  those  who  volunteer  their  cooperation.  Probably  there  will 
be  a better  response  to  the  Board's  appeal  for  cooperation  than  has  been  accord- 
ed to  the  average  open  price  association,  because  the  Board  carries  the  expense 
associated  with  the  compilation  and  dissemination  of  statistics,  whereas  open 
price  associations  must  require  contributors  to  bear  this  expense.  But,  as 
previously  intimated,  among  a large  percentage  of  those  who  actually  become 
members  of  open  price  associations,  thus  indicating  that  they  have  not  deniurred 
at  the  expense  involved,  a very  serious  laxness  in  reporting  has  been  manifested. 


■ * 

1 


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225 


The  same  laxness  is  likely  to  he  shorn  by  those  who  report  to  the  Federal  Heserve 
Board. 

The  greatest  assurance  of  success  would  seem  to  be  promised  by  the  es- 
tablishment of  one  great  statistical  bureau  for  the  whole  country  under  the  di- 
rection and  control  of  an  agency  such  as  the  Department  of  Commerce,  this  agency 
to  be  empowered  to  require  manufeicturers  and  others  to  submit  at  stated  periods 
reports  of  prices,  production,  stocks,  costs  and  the  like,  whereupon  these  re- 
ports would  be  conpiled  in  such  a way  as  to  reveal  the  salient  facts  of  corrpetl- 
tion  without  divulging  figures  of  individual  sand  then  disseminated  in  published 
form  among  those  interested.  Inasmuch  as  this  Government  statistical  bureau 
would  have  no  authority  over  industry  except  to  require  that  reports  be  submitted 
at  stated  intervals,  there  vrould  be  little  ground  for  fearing  that  the  establish- 
ment of  such  a bureau  would  mean  too  much  Government  in  Industry.  Neither  would 
the  stock  objection  raised  against  government  ownership,  to  wit,  that  government 
officials  lack  the  initiative  and  energy  t o successfully  operate  bu.siness  enter- 
prises, auply  here,  for  the  collection,  conp)ilation,  and  dissemination  of  statis- 
tical data,  when  once  successfu-lly  launched  into  operation,  would  require  little 
more  than  the  establishment  of  a set  routine  of  proceduje.  The  system  established 
should  be  such  as  to  insure  proirptness  in  the  issuance  of  reports.  In  open  price 
system  utterly  fails  of  its  purpose  unless  reports  can  be  issued  with  sufficierfc 
dispatch  to  enable  recipients  to  use  them  as  indices  of  market  conditions. 

By  way  of  e^rceriment  the  Department  of  Commerce  might  mame  a beginning 
in  a few  of  the  basic  industries  where  fluctuations  in  market  rates  are  particu- 
larly severe.  Probably  it  would  be  desirable  to  first  make  a start  in  industries 
from  which  the  Federal  Reserve  Board  is  not  yet  receiving  reports,  thus  avoidirg 
duplication  of  effort.  Ultimately,  if  the  experiment  of  the  Department  of  Com- 
merce should  prove  successf'il,  the  Federal . Reserve  Board  would  no  longer  find  it 
necessary  to  gather  its  ov/tl  statistics  to  guide  it  in  its  oaniiing  policy,  but 


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226 


could  utilize  those  available  in  the  Department  of  Commerce.  Since  it  probably 
would  take  a long  tiir©  for  the  Government  to  develop  an  open  price  system  ade- 
(juate  to  serve  the  needs  of  the  whole  country,  open  price  associations  might  be 
permitted  to  function  until  such  time  as  the  success  or  failure  of  the  Government 
experiment  shall  have  been  definitely  ascertained.  If  the  results  achieved  by 
the  Government  should  prove  successful,  open  price  associations  probably  would 
not  need  to  be  legislated  out  of  existence;  they  would  Ino  doubt  cease  the  open 
price  pliase  of  their  activities  of  their  own  accord,  and  in  all  probability 
'.■vould  confine  themselves  to  ordiriary  trade  association  activities.  Even  if  they 
should  fail  to  abandon  their  open  price  activities,  little  harm  would  result, 
for  they  would  no  longer  possess  a monopoly  of  business  information.  In  the 
event  that  the  experiment  of  the  Government  should  turn  out  to  be  a failure,  the 
machinery  developed  by  open  price  associations  would  be  at  nand  as  a basis  for 
outting  into  operation  some  plari  looking  toward  an  association  of  buyers  and 
sellers  in  each  industry,  organized  for  the  purpose  of  gathering,  conpiling  and 
disseminating  vital  business  statistics  among  themselves. 


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EXHIBIT  I 


OPEN  PPICE  ASSOCIATIONS 

1.  Anerican  Hardwood  I/Ianufacturers'  Association. 

2.  Anerican  Tack  IlaniifactvLrers 'Association. 

3. * Architectural  Iron  8c.  Bronz  Ifeuiufacturers. 

4.  Asbestos  Brake  Lining  Association. 

5.  Asbestos  Paper  Ivlanufacturers'  Association. 

6.  Asbestos  Textile  Llanufacturers ’ Association. 

7.  Associated  Metal  Lath  lfe,nufacturers. 

8.  Automobile  Accessory  Dealers'  Association. 

9. *Bar  Iron  Institute,  National. 

10.  Beet  Sugar  Man'^afacturers'  Association. 

11.  Belt  Buckle  Society. 

12.  Blanket  Association. 

13. *Bolt,  Nut  and  Eivet  Institute. 

14.  Book  ;^aper  Manufacturers'  Association. 

15.  Box  Manufacturers',  National  Association  of. 

16.  Boys'  Blouse  & Shirt  1/Ianufacturing  Association,  National. 

17.  Brass  Manufacturers,  National . Association  of. 

18.  Brass  and  Copper  Statistical  Exchange. 

19. *Bridge  Builders'and  Structural  Society. 

20.  Broom  Handle  Mantifacturers'  Association. 

21.  Builders'  Supply  Association,  National. 

22.  California  Vvliite  Sugar  Pine  Ivlanufacturers'  Association. 

23.  Canadian  Pulp  & Paper  Association. 

’•'Nherever  the  asterisk  is  used  it  indicates  that  the  association  'thus 
designated  was  organized  by  Arthur  J.  Eddy,  the  founder  of  the  open  price 
movement. 


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24.  Caimers'  Association,  National. 

25.  Cash  Check  Maniofactnrers’  Association. 

26.  Chair  i’ilanufacturers,  National  Association  of. 

27.  Chicago  Eetail  Lumber  Dealers'  Association. 

28.  Coal  Association,  Natioral. 

29. *Cold  Roll  Strip  Steel  Institute. 

30.  Cordage  Institute. 

31.  Cotton  Textile  Association. 

32.  Cotton  Thread  llanufacture-rs'  Exchange. 

33.  Cut  Sole  Mamof acturers'  Association. 

34.  Drill  and  Reamer  Society. 

35.  D-ack  Association. 

35. ^Eastern  Bar  Iron  Society. 

37.  Eastern  Shook  and  ?Jooden  Box  Manufacturers'  Association. 

38.  Eastern  Terra  Cotta  Association. 

39.  Electrical  Contractors'  Exchange. 

40.  Electrical  Sui^ply  Jobbers'  Association. 

41.  Electric  Wire  Manufacturers'  Association. 

42.  *Explosives,  Institute  of  Makers  of. 

43.  Eine  Cotton  Goods  Exchange. 

44.  ^Finishers  of  Cotton  Fabrics,  National  Association  of. 

45.  Florida  Citrus  Exchange. 

46.  G-as  Appliance  lianufacturers'  National  Exchange. 

47.  G-ingham  Association. 

43.  Gold  Filled  Chain  Manufacturers'  Exchange. 

49.  Hack  Saw  bhmfacturers'  Association. 


50.  Hard  Yam  Soinners'  Association. 


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51.  Hickory  Products  Association. 

52.  *Hollow  Metal  Door  Institute. 

53. *Hoop  Band  Strip  Steel  Association. 

54.  Indiana  Millers'  j^ssociation. 

55.  *Institute  of  Electrical  Contractors. 

56.  *Institute  of  Lighting  Fixture  Maniifacturers. 

57.  Institute  of  Paper  Package  Manufaeturers. 

58.  *Institute  of  Tool  f/knufacturers. 

59.  Knife  Information  Bureau. 

60.  Knit  Goods  Manufacturers  of  America. 

61.  Lamp  Standardization  Exchange. 

62.  LaundryiY'.en ' s National  Association. 

63.  Lead  Institute. 

64.  Leather  Belting  Exchange. 

65.  Lime  Manufacturers,  National  Association  of. 

66.  Linseed  Oil  Institute,  Armstrong  Bureau  of  Related  Industries. 

67.  Lithographers'  Co-opei-ative  Association. 

68.  Lithopone  Institute. 

69.  Lumbennens'  statistical  Bureau. 

70.  Machine  Tool  Builders'  Association,  National. 

71.  *Man§ranese  Steel  Founders'  Society. 

72.  *I'.ianganese  Track  Society. 

73.  ifester  Dyers'  Exchange  of  Ne\?  England. 

74.  Men's  Belt  Exchange. 

75.  Meter  Manufacturers'  Exchange. 

76.  Michigan  Hardwood  Manufacturers'  Association. 


77.  . Ilichigan  State  Millers'  Association. 

78.  Mid-West  Credit  and  Statistical  Bureau  (Cement). 

79.  Millers'  Exchange,  SOTj.thwest. 

80.  Missouri  Valley  Sand  & Gravel  Producers'  Association. 

81.  News  Print  Service  Burea'a. 

82.  Northern  Hemlock  & Hardwood  Manufacturers'  Association. 

83.  Northern  Pacific  Fruit  Distrih-'tors. 

84.  Ohio  Millers'  State  Association. 

85.  Optical  Iv'tou.facturers'  Association. 

86.  Padlock  l(5anufacturers'  B^ireau. 

87.  Photo  Engravers'  Association. 

88.  Pickle  Ivlanufacturers'  Association. 

89.  Piano  Bench  & Stool  Manufacturers,  National  Association  of. 

90.  Pipe  Fittings  and  Valve  Exchange. 

91.  Pressed  Metal  Association. 

92.  Pressed  Steel  Association. 

93.  Eaiige  Boiler  Exchange. 

94.  Rigid  Conduit  !fenufacturers'  Association. 

95. *Eing  Travellers  Society. 

9S.*Rolling  Steel  Door  Society. 

97. *Roofing  llanufacturers'  Association. 

98.  Sales  Book  Ivknufacturers'  Association. 

99.  Salt  Producers'  Association. 

100.  Sewer  Pipe  Associati  on. 

101.  Sheet  and  Tin  Plate  Rianufacturers'  National  Association. 

102.  Shoe  String  Association. 


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103.  The  Silk  Association  of  Meriaa. 

104.  Slack  Cooperage  Industrial  Bureau. 

105.  Society  of  Ivknufac tuning  Confectioners. 

106.  So-ath  Dakota  and  Southwestern  Minnesota  Millers'  Association. 

107.  Southeastern  Millers'  Association. 

108.  Southern  Illinois  Millers'  Association. 

109.  Southern  Pine  Association. 

1 10 . Southe  m St  at  i s t i cal  r eau  ( Cement ) . 

111.  Stationers'  and  Manufacturers'  National  Association. 

112.  Steel  Barrel  Ivlanufacturers'  Association. 

113. *Steel  Founders'  Society  of  America. 

114.  Steel  Furniture  Manufacturers,  National  Association  of. 

115.  Steel  Locker  & Shelving  Manufacturers'  Exchange. 

116.  Tanners,  National  Association  of. 

117.  Tap  & Dye  Institute. 

118. *Tool  Steel  Society. 

119.  TuD'’alar  Plumoing  Goods  Exchange. 

120.  The  United  States  Potash  Producers'  Association. 

121.  Waxed  Paper  Manufacturers'  Association. 

122.  We 0 Ding  I/Ianufacturers'  Exchange. 

123.  Wehhing  Products  l.'lanufacturers'  Exchange. 

124.  West  Coast  Lumbermens'  Association. 

125.  Western  Paving  Brick  Association. 

126.  Western  Petroleum  Refiners'  Association. 

127.  Westena  Pine  Mianufacturers'  Association. 

128.  Western  Red  Cedarmens'  Association. 

129. *Window  Shade  Manufacturers. 


130.*Wire  Fence  I-^anufacturers'  Association. 


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131.  Woolen  Goods  Excliange. 

132.  Writing  Paper  Man-ofacturers'  Association. 


— — 

EXHIBIT  II 

MimTES  OF  THE  MEETING  OF  THE  JffiMBEHS  OF  THE  OPEN  COMPETITION 

PLAN  OF  THE  AI'/ERICAN  HAEDITOOD  MIAl'EJFACTUHEES'  ASSOCIATION,  HELD 

AT  THE  GEHNEWALD  HOTEL,  NE?J  OBT.EANS,  LA.,  FEBHJASY  24th,  1919. 

Iv'Ir.  F.  L.  Adams  acted  as  Chairman,  in  the  absence  of  J/Ir.  J.  B.  Robinson, 

The  composite  market  report  was  distributed,  and  a discassion  of  mar- 
ket conditions  followed. 

Mr.  ^arks  said  that  he  found  the  market  in  better  shape  than  it  was 
thirty  days  ago. 

Mr.  Ryan  said  that  he  believed  the  Southern.  M^ufacturers  were  light 
on  stocks.  That  he  had  taken  up  with  the  U.  S.  Bureau  at  Houston  the  question 
of  fumisxiing  labor.  The  reply  that  he  received  indicated  that  there  was  plenty 
of  labor.  They  failed  to  furnish  any,  however,  and  upon  writing  them  they  again 
replied  that  there  was  plenty  of  labor,  b\\t  that  it  vrould  not  leave  the  cities. 
Believed  that  labor  conditions  were  getting  to  be  a serious  problem. 

Mr.  Deutch  said  he  found  many  wholesalers  buying  up  stocks  with  the 
view  of  taking  ad-vantage  of  the  better  prices  bound  to  come,  and  because  they 
expect  stocks  to  be  hard  to  get  in  the  near  future.  LTaen  the  ocean  rates  become 
stable  there  will  be  a stampede  of  buying  for  the  foreign  market,  as  Europe  was 
in  need  of  large  stocks,  and  everything  that  is  dry  will  be  moved.  He  believed 
that  when  this  occurred  prices  would  be  better  than  before. 

Ivir.  Brev/er  stated  that  it  looked  as  if  the  wholesalers  had  taken  on  a 
lot  of  business  at  any  old  price  and  cleaned  up  the  small  manufacturers  of  their 
stocks.  He  had  found  his  inquiries  to  have  increased  heavily  during  the  past 
week. 

Mr.  Bohlssen  said  he  found  that  the  Texas  box  manufacturers  were  buying 
heavily  and  offering  $20.00  at  the  mill. 

Mr.  Sx'ith  said  that  it  looked  as  if  il^Z  Oak  was  going  to  be  a bad  seller. 


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llr.  Cleveland,  who  had  just  made  a swing  around  the  huylng  circle, 
said  that  he  found  manufacturers  well  stocked  and  most  of  them  han^pered  "because 
of  the  failure  of  the  Government  to  effect  settlements  on  contracts.  He  looked 
for  a heavy  demand  for  #2  Gum.  Stated  he  was  holding  Sap  Gum  for  ^37. 00  at  mill. 

Mr.  Adams  stated  that  his  mill  had  been  shut  down  since  last  November 
because  of  weather  conditions,  and  had  a little  over  two  million  feat  of  stocks 
on  hand.  He  said  that  Louisiana  had  experienced  a thirty  inch  rainfall  in  ninety 
days,  and  of  course  there  was  no  production. 

Mr.  L.  C.  Cornelius,  of  St.  Louis,  who  was  present,  said  he  found  furni- 
ture factories  buying  better.  He  was  asking  $50.00  for  his  Ash,  but  manufacturers 
were  quoting  $45.00  to  $47.00.  Believed  there  would  be  a better  demand  for  Bed 
Gum.  The  demand  for  box  material  was  off.  This  was  due  to  packers’  production 
being  reduced  as  a result  of  the  Armistice.  Looked  for  an  average  price  on  #1 
and  #2  Gum,  and  better  prices  on  F.  a.  s.  Sap.  Ash  stocks  very  low. 

Mr.  Stanford  said  he  had  more  timber  orders  on  hand  at  satisfactory 
prices  than  his  mill  could  produce. 

Mr.  Patterson  said  that  his  commissary  man  reported  prices  coming  down 
but  the  consumer  could  not  find  the  reduction  when  he  paid  his  monthly  bills. 

Said  that  returned  colored  soldiers  were  bent  more  on  trouble  than  work. 

Mr.  Geissler  stated  tliat  he  believed  the.  Association  method  of  adver- 
tising might  better  be  carried  out  by  a campaign  to  educate  the  public  to  the 
fact  that  lumber  was  the  cheapest  of  all  building  materials  and  that  it  had  at 
no  time  advanced  as  had  other  comrodities.  He  did  not  believe  that  the  public 
needed  education  as  to  the  uses  of  hardwoods,  but  that  they  did  need  to  be  educat- 
ed to  the  fact  th.at  hardwood  prices  had  not  advanced  hardly  any  beyond  the  cost 
of  production. 

Mr.  Geissler  stated  that  he  did  not  believe  that  those  present  realized 


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the  exaggerated  idea  of  the  public  as  to  the  prices  that  icanufacturers  were 
obtaining  and  the  profits  they  were  making.  Believed  if  public  were  educated 
to  the  fact  that  mills  were  coirpelled  to  close  down  because  they  could  make  no 
profit  on  the  present  price  basis  it  woixld  be  a good  thing. 

Mr.  Gadd  then  related  the  movement  on  foot  at  V/ashington  to  plan  the 
return  of  industry  to  normal  conditions,  and  read  statements  by  Secretary  Eed- 
field  relating  thereto. 

Mr.  I^an  thought  the  Government  ought  to  cut  the  strings  and  get  o\it 
of  the  price  fixing  business. 

There  followed  a discussion  as  to  the  value  of  Oak  and  Gum  Stunpage. 

There  being  no  further  business,  the  meeting  adjourned. 

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EXHIBIT  III 


CX)HSTIT'JTIQN 
ARTICLE  I 
HAI.-IE 

This  organization  shall  he  kno\vn  as 

-THE  TAP  AITO  DIE  INSTITHTE- 

ARTICLE  II 
OBJECTS 

The  purpose  of  this  Institute  shall  he:- 

1.  The  stinrulation  of  acquaintance,  confidence  and  cordial  relations 
amongst  its  memhers  and  throu^out  the  trade. 

2.  The  improvement  of  the  tap  and  die  manufacturing  business  by  striv- 
ing toward  the  correction  by  all  proper  and  legitimate  means,  of  unlntelli vences. 
faulty  standardization  and  abuses  in  the  trade,  and  the  promotion  of  publicity 
in  the  transaction  of  business. 

3.  The  development  of  methods  for  the  removal  of  false  impressions  and 
in  their  place  to  disseminate  correct  infonnation  and  to  collect  and  distribute 
accurate  statistics  regarding  the  entire  indxistry. 

4.  To  devise  a scientific  system  of  cost  accounting,  suitable  for  the 
industry,  to  the  end  that  each  manufacturer  engaged  in  the  industry  may  accurately 
knov/  the  cost  of  his  output.  In  this  connection  it  is  not  the  purpose  of  the 
Instituite  to  inn?ose  upon  any  member  any  cost  items  or  to  use,  in  any  manner,  the 
cost  system  as  a means  for  controlling:  prices. 

5.  The  encouragement  of  the  true  spirit  of  "cooperative  conroetition” 
by  bringing  out  into  the  open,  all  competitive  conditions  and  introducing  the 
open  price  policy. 

6.  To  cooperate  along  the  lines  of  metallurgical  research  in  the  secur- 
ing of  better  steels  for  use  in  manufacturing  taps  and  dies,  so  that  the  result 
would  be  to  raise  the  standard  of  quality  to  its  highest  point  of  efficiency, 
thereby  making  a great  saving  to  the  consiimer. 


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Further  to  cooperate  in  the  standardization  of  sizes,  dimensions  and 
tolerances  of  the  prodiict  Kanufactnred.'by  the  Institute. 

7.  To  avoid  the  use  of  the  Institute  as  a price  fixing  or  trade  con- 
trolling device;-  to  this  end,  no  information  will  oe  received,  distributed  or 
exchanged  relative  to  actual  selling  prices  previous  to  the  making  of  an  actml 
and  bona  fide  quotation  or  bid,  or  effecting  an  actual  sale,  - or  relative  to 
any  customers  with  viiiom  or  territory  in  which  the  members  intend  to  do  business, 
and  no  member  shall  enter  into  any  agreement,  direct  or  indirect,  with  any  other 
member  that  has  to  do  with  any  prohibited  practices,  or  any  other  arrangement 
that  will  interfere  with  free,  open  and  active  competition  among  members  or 
with  any  other  person.  All  information  received  and  distributed  sloall  be  abso- 
lutely accurate. 

8.  To  cooperate  with  the  Federal  Trade  Commission  to  expose  and 
s\:px^r®ss  unfair  methods  of  competition. 

9.  To  eliminate  secrecy  either  as  to  the  meetings  or  operations  of 
the  Institute.  All  its  proceedings  shall  be  reduced  to  writing  and  carefully 
preserved. 

ABTICUS  III 
lE'IBERSHIP 

Section  1.  Any  individual,  firm  or  corporation,  engaged  in  the 
commercial  manufacture  and  sale  of  taps  and  dies  shall  be  eligible  for  mem- 
bership in  the  Institute. 

Section  2.  All  who  have  become  members  before  July  1st,  1920,  shall 
be  charter  members.  Thereafter  applicants  for  membership  will  require  for 
election  the  affirmative  vote  of  three-fourths  of  the  members  present  at  any 
regular  meeting. 

Section  3.  All  memberships  are  for  full  periods  of  a year  and  are 
automatically  renewed  from  ye^-r  to  year  unless  thirty  days  prior  to  the  termin- 


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ation  of  a full  year  of  membersMp  a member  shall  give  notice  of  his  resignation 
in  writing.  A member  may  resign  from  the  Institute  at  any  time  during  his  year 
of  membership  on  thirty  days'  notice  of  his  desire  so  to  do,  but  no  resignation 
shall  be  accepted  imtil  the  members  resigning  shall  have  completed  the  payment 
of  all  dues  for  his  then  f-oll  current  year. 

ARTICLE  lY 
OmCERS 

Section  1.  The  officers  of  the  Institute  shall  be  a President,  a Vice 

President  and  a Secretary-Treasurer. 

Section  2.  All  officers  shall  be  elected  at  the  annual  meeting  and 
shall  hold  office  for  one  year  or  until  their  successors  have  been  duly  elected  . 

Section  3.  The  Executive  Committee  shall  consist  of  the  President, 

Vice  President  and  three  other  members  to  be  elected  at  the  annual  meeting. 

ARTICLE  V 

I.EETDTGS 

Section  1.  The  Institu.te  shall  hold  its  regular  annual  meetings  on 
the  day  as  its  regular  monthly  meeting  in  the  month  of  April  of  each  year; 
the  first  of  such  annual  meetings  to  be  held  the  year  next  following  the  meet* 
ing  for  organization  of  the  Institute.  The  annual  meeting  shall  be  held  at  su.ch 
place  as  shall  be  determined  by  vote  of  the  members. 

Section  2.  The  regular  monthly  meeting  of  the  Institute  shall  be  held 
at  such  convenient  hour  of  the  Thursday  immediately  preceedlng  the  second  Friday, 
of  each  month  and  at’  such  place  as  shall  be  designated  by  the  Executive  Committee. 
Special  n»etings  of  the  Institute  may  be  called  by  the  president,  or  on  recjuest 
of  three  members  to  the  President,  but  such  call  shall  state  the  purpose  of  the 
meeting  and  no  other  business  shall  be  transacted  at  the  spjecial  meeting  excei)t 


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as  is  amomoed  in  the  notice.  Notices  of  meetings  of  the  Institute  shall  he 

niailed  to  members  ten  (10)  days  ‘before  the  day  of  meeting. 

Section  3.  A quonjun  of  all  regular  and  special  meetings  of  the  Institut 

shall  consist  of  a majority  of  its  mem'bers. 

AETICLE  11 

MEMBERSHIP  EEES  AI-T33  HIES 

Tlaere  shall  "be  t^;vo  distinct  funds,  (a)-  MEI,!BERSEIP  EHIIP,  (b)  PRINCIP^ 

The  Mem'bership  Pi.md  shall  "be  provided  "by  the  payment  of  a membership 
fee  of  One  Hundred  Dollars  by  each  member,  and  this  f'snad  shall  be  maintained 
thereafter  by  ^oecial,  equal  assessments,  when  necessary,  such  fecial  assess- 
ments to  be  ordered  at  any  regular  meeting  of  the  Institute  by  a majority  vote 
of  all  members  present. 

The  Membership  Fund  shall  be  within  the  custody  of  the  Secretary^ 
Treasurer,  but  shall  only  be  used  on  warrants  drav«i  against  this  j^^mbership 
Fund  by  the  Secretary-Treasurer  and  countersigned  by  the  President  to  cover 
the  extraordinary  exr-enses  of  the  Instittxte  such  as  luncheons  or  other  enter- 
tainment expense,  traveling  expenses  of  the  Secretary- Treasurer,  postage  and 
printing  expense  on  all  caterials  mailed  to  the  general  public  or  to  the  trade, 
other  than  members,  upon  the  instructions  of  the  Institute,  and  all  printed 
matter,  etc.  furnished  to  the  members  for  their  convenience  in  reporting  etc. 

The  expenditures  under  this  fund  shall  be  directly  and  entirely  within  the 
control  of  the  Institute  or  its  Executive  Comtriittee. 

The  Secretary-Treasurer  shall  keep  an  accurate  record  of  all  items  of 
disbursements  of  the  Ivfembership  Fimd,  and  be  prepared  at  all  times  to  exhibit 
vouchers  for  such  disbursements. 

The  Principal  Fi:nd  shall  be  provided  through  the  payment  by  each 


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member  of  monthly  dues,  payable  on  the  first  day  of  each  month.  The  amount  of 
dues  to  be  paid  by  each  member  shall  be  in  approximate  relation  to  his  ann-oal 
volume  of  sales;  and  be  pro  rated  on  a basis  fixed  by  the  Executive  Committee. 

The  Principal  Pond  shall  be  paid  directly  by  the  members  to  the 
Secretary-Treasurer,  and  such  payments  shall  constitute  the  entire  Principal 
Fund,  and  shall  be  used  by  the  Secretary- Treasrarer  to  cover  all  expanses  of  the 
maintenance  of  the  Institute,  such  as  clerk  hire,  office  rent,  office  eq^uip- 
ment,  telephone  and  telegraph  charges,  printing,  postage,  exp  res  sage  and  the 
compensation  of  the  Secretary-Treasurer;  in  fact,  every  expense  incidental  to 
the  conduct  of  the  Institute,  except  such  items  as  are  ^^ecifically  covered 
by  the  Msmbership  Fund. 

ARHCLE  VII 

AIv'ISiroi.TSTTS  TO  THE  CQMSTITUTIOIT 

Those  Articles  may  be  amended  by  a two-thirds  vote  of  the  members 
present  at  any  regular  or  special  meeting  provided  notice  of  such  amendment 
shall  be  forwarded  to  each  member  ten  (10)  days  in  advance. 

BY-LAWS 

Section  1.  PEESIDEl'IT  MD  VICE  PEESIPEMT  - The  President  shall  per- 
form the  usual  duties  of  the  chief  executive  officer  of  such  an  organization, 
and,  in  the  event  of  his  absence,  the  Vice  President  shall  act  in  his  stead. 

Section  2.  SECHETAEY-TPEASUESE  - The  Secretary- Treasurer  shall  be  t^ 
Q];ily  naid  officer  and  shall  be  from  outside  of  the  trade. 

It  shall  be  the  duty  of  the  Secretary-Treasurer 

(a)  To  take  care  of  the  finances  and  funds  of  the  Institute  in 

accordance  wlththe  provisions  hereinafter  set  forth. 

(b)  To  provide  and  operate  a regular  central  office  for  the  proper 


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care  of  the  husiness  of  the  Institute. 

(c)  To  keep  in  close  personal  t ouch  with  all  memhers  at  meetings 

and  hy  personal  visits. 

(d)  To  conduct  the  correspondence  hetv/een  the  Institute  and  its 
members  and  serve  as  a bond  between  the  concerns  in  the  trade,  whether  members 
of  the  Institute  or  not. 

(e)  To  maintain  and  increase  the  membership  of  the  Institute. 

(f)  To  serve  as  a clearing  house  betv/een  the  members  for  the  ex- 
change of  credit  information  with  the  object  of  reducing  losses. 

(g)  To  attend  all  meetings  of  the  Institute  and  keep  accurate 

stenographic  records  thereof. 

(h)  Under  the  instructions  of  the  Executive  Commirtee  to  develop 
and  distribute  information  and  statistics  of  educaticnal  valxie  relating  to 
costs  of  production,  selling  markets,  trade  and  labor  conditions. 

Section  3.  EXECUTIVE  OOMTTTE  - The  Executive  coronittee  shall  manage 
all  of  the  affairs  of  the  Institute  aiid  shall  Imve  absolute  powers  to  perform 
any  and  all  acts  in  furtherance  of  the  purposes  of  this  Institute,  as  set  forth 
herein.  The  Executive  Committee  shall  meet  at  the  call  of  the  President  or  at 
the  reqiiest  of  any  two  members  on  five  days'  notice,  and  three  of  such  committee 
shall  be  a q[aorum. 

Section  4.  VOTIUG  POVEE  - At  all  meetings  each  member  shall  have  but 
one  vote,  but  may  be  represented  by  two  or  more  persons. 

Section  5.  DROPPING  OF  mffiEES  - By  a two-thirds  vote  of  the  members 
present  at  any  meeting,  a member,  provided  he  has  been  given  ten  days'  notice 
of  the  proposed  action  and  an  opportunity  to  be  heard,  may  be  dro:x/ed  for 
failure  to  pay  any  assessments,  within  thirty  days  after  same  are  made  or ,^r 


filing  false  or  misleading  iriformation. 


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Section  6.  RSGULAE  COl^'flETTEE  - Standing  ConKittees  may  "be  appointed 
by  the  Executive  Committee  sfubject  to  the  approval  of  the  Institute. 

Section  7.  OEDEE  OF  BITSIIIESS  - The  order  of  business  shall  be,  as 

follows 

(1)  Calling  of  Eoll 

(2)  Reading  of  minutes  of  previous  meeting 

(3)  Election  of  New  Members 

(4)  Reports  of  Officers 

(5)  Reports  of  Committees 
(S)  Conarnmi  cations 

( 7 ) ■ Unf  ini  she  d Bus  ine  s s 

(8)  New  Business 

(9)  Reports  of  Members  on  Conditions  affecting  the  Industry. 

Section  8.  GOVERNANCE  OF  MEETINGS  - Roberts  Roles  shall  govern  at  all 

meetings. 

Section  9.  AI.'ENDJ.IQTT S TO  BY-LAWS  - These  By-Laws  may  be  amended  by-  a 
two-thirds  vote  of  the  members  present  at  any  regular  or  special  meeting  provided 
notice  of  such  amendment  shall  be  forwarded  to  each  member  ten  days  inadvance. 

We,’  the  undersigned,  endorse  the  purposes  and  subscribe  to  the  Consti- 
tution and  By-Laws  of  THE  TAP  AND  DIE  INSTITUTE. 

Upon  notification  from  the  Organization  Service  Corporation,  we  will 
pay  to  the  Secretary- Treasurer  of  the  Institute  a membership  fee  of  One  Hundred 
Dollars  and  monthly  dues  thereafter  as  fixed  by  the  Executive  Committee. 

Name 

Name 


Address 


( 


MAIl^^  H ICKORY  PRODUCTS  ASSOCI  AT  I ON.  2 9 SO.  LA  SALLE  ST..  CHICAGO 
(Check  which)  QUOTATION  Q CHANGE  OF  QUOTATION  Q CONTRACT  Q 


MADE  BY  (Mcmqer) 


REC'O  AND  AC  K.  BY  H PA 


CREDIT  RATING 

BY  IN  CON  BY  SALES' p. 

. . MAIL  1 1 TRACT  [_)  MAN  U 

. . OPEN  []  OR  SEALED  Q] 


trv^< 


REFERRED  BY  H P A TO 


REGARDING 


CUSTOMER . 


YOUR  QUOTATION  □ CHANGE  OF  QUOTATION  □ CONTRACT  □ 


REPORTED  UNDER  DATE  OF_ 


HAS  BEEN 


RECEIVED  AND  NOTED.  IT  WILL  BE  HANDLED  AS  IS  CUSTOMARY. 

HICKORY  PRODUCTS  ASSOCIATION 

29  SOUTH  LA  SALLE  STREET,  CHICAGO 

IL, 


mailed^y^HICKORY  products  ASSOCIATION  29  SO  lasallest  CHICAGO 
ICmfc-<  whk  m)  OUO'^AriON  ^ j change  of  -OUOTATI  N contra  -T  ' 


MADE  BY  I Ml  Mi.f  n\ 


■{  ■ C A N i K IJT  M 


OPEN  ■ I,  r p : 


/C  ' *■< 

OC  f 


!•  I I - . i.  • ! U » H I’  A r 


\ 


REQUEST  FOR  INFORMATION  ON  PRICES  QUOTED 


Mr.  C.  K. 'STEVENSON,  Business  Manager,  

National  Bottle  Manufacturers  Association, 

120  Broadway,  New  York  City,  N.  Y.  

Dear  Sir: — 

I desire  information  as  to  prices  quoted  and  name  of  member  securing  the  work  on  the 
proposal  described  below. 

Please  secure  this  information  by  (a)  Inquiry  sent  to  entire  membership. 

(Strike  out  clause  not  wanted)  (b)  Inquiry  sent  to  selected  members  as  checked  on  back  of  this  sheet. 


Huyer’s  Name 

Buyer's  .\ddress_. 


QUANTITY 


DESCRIPTION 


capacity;  weight 


PRICES  WE 
QUOTED 


Delivery  Conditions  and  Terms  Offered  by  Us. 


Date  or  dates  of  shipments 


Freight  .Mlowance... 
Terms  of  Payment... 


Signed 


R KM AUKS 


t tfi 


lBMA—9 


4 


J 


NATIONAL  BOTTLE  MANUFACTURERS  ASSOCIATION 
C.  R.  STEVENSON,  Business  Manager 
120  Broadway,  New  York  City 

Open  Price  Exchange  No 

REQUEST  BY  BUSINESS  MGR.  FOR  INFORMATION 

To  the  Member  Addressed: — 

VVe  have  received  a request  for  information  as  to  prices  quoted  and  the  member  securing  the 
order  described  below.  * 

Please  reply  promptly  using  this  sheet  and  filling  in  the  prices,  if  any,  to  report.  If  you 
furnish  figures,  all  figures  secured  will  be  reported  to  you.  This  file  cannot  be  closed  until  you  report. 

C.  R.  STEVENSON,  Business  Manager. 


Buyer’s  Name — 
Buyer’s  .\ddress. 


PRICES  WE 
QUOTED 


WEIGHT 


lAPACITY 


ITEM 

NO. 


DESCRIPTION 


QUANTITY 


.(.Answer  Yes  or  No) 
.(Answer  Yes  or  No) 
.(.Answer  Yes  or  No) 


Date  or  dates  of  sliipnient.s - 

I'Yeight  Allowance 

If  you  did  not  receive  order,  do  you  know  who  did 
Answer  (giving  name  of  concern). 

Date 


Term.s  of  Payment. 


Signed. 


REMARKS 


Form  NBMA-10 


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NATIONAL  BOTTLE  MANUFACTURERS  ASSOCIATION 
C.  R.  STEVENSON,  Business  Manager 
120  Broadway,  New  York  City 


REPORT  OF  PRICES  QUOTED 

To  the  Members  Reporting: — 

we  received  inquiry  for  information  as  to  prices  quoted  on  the  pro- 
posal described  below,  liviuiry  has  been  sent  and  information  received  from  the  members  whose 
prices  are  shown  and  copies  of  this  report  embodying  this  information  are  being  sent  to  all  members 
reporting. 

Cuyer's  ^ 

Ihiycr’s  — — — 


PRICES  QUOTED  BY 


DESCRIPTION 


.CAPACITY  WEIGHT 


.Members  Reporting 

Total  Bid 



The  order  was  secured  by- 


Dalcs  of  Shipmciit.s 


rreij;ht  ,'Ulowance 

Terms  of  Payment 


fill, 

K PM ARKS 

.'\ny  \.iriatum>  in  ^pccitn'ations,  ijuantitir.s  or  terms  will  be  noiei]  below. 

, • r ' ' 9 , ' 


Business  Manager. 


l e.rm  NliMA-U 


MEMBERS  REPORTING  FORM 


Sheet  1. 


|0 


Name  of  Member 

Date  Reported Prices  Effective. 

Remarks:  


N.  B.  Where  “Box”  quotations  are  made  quote  “Count  Goods”  except  where  weight  is  stated. 


Classification 

Style 

Package 

Memo. 

Wt. 

Count 

No.toLb. 

Price 

BUTTER  CREAMS 

Corn,  Small 

CARAMELS 

60 

46 

26 

Whipped  Cream,  Wrapt 
Whipped  Cream,  Wrapt 

COCOANUT  WORK 

Caramels, Pure  Crystallized.. 
Cheapest  Caramels,  Crystal- 

CHOCOLATES 
Machine  Dipped 

Chocolate  Drops 

Chocolate  Chips 
Solid 

Pails 

Chocolate  Chips 

Pails 

Nougats  .. 

Peanuts 

Almonds 

CREAM  BONBONS 
Crystallized 
CREAM  WAFERS 

Plain 

Fancy 

Pails 

CREAM  AND  GUM 
MIXED  -Crystallized 
60%  Gum  Work 
60%  Cream  Work 

Large 

Small 

Pails 

Pails 

GUM  WORK 

A.  B.  Crystallized 
Sugar  Crystallized 
A.  B.  Sugar  Rolled 
Soft  Sugar  Rolled 
Spiced  Drops  and  Strings 
Licorice  Drons 

Pails 

Pails 

Bbls 

Bbls. 

Boxes 

Boxes 

1 

1 

f:;re.-  Glicets. 


■ ote- 


o-on. 


CO  .. 


1 


X 


% 

% 

.M 

A 

Y 

.i 


H 


t 


'I 


, T 


V! 


t 

I 

i 

i 

I 

J 

in 

• J 
.** 


i 


WEEKLY  MARKET  REPORT 


Net  Cash  Basis  at  your 
Place  of  Business 
Reduce  to  basis  named  or 
state  allowance  made  to  do  so 

F.O  B.  Cars  Mill 
Price  to  Jobbers 
Carloads 
Bulk 

Local  Mill 
Prices 
to  Retailers 
L.C.L.  2454*  Papef 

Local  Kuying  price  bii.,  No.  1 wheat, Corn 

How  is  trade?  

Week’s  output bbis. 

Wheat  received  from  Producers bus. 

Wheat  on  hand  bus. 

Flour  on  hand bbls. 

Remarks:  


EXHIBIT  12 


N ame 

Address  

As  of  Saturday 


I 


* ?kiatat»iL9  dujrtfliMr  h 

IMD*  ^ ^ 

OrAara  .^HA^re>4  U/ll»AO 

OrAar  H»»  jl] 

3efA  - 4 oars  1x10  a&Afti  "iJrop^s*frm  ^port 

Si'Tf  - 1 oarlOaA.aa  follows  i* 
lz4Ti4ira4»mr  343S 
1x6- 

1 2l2  flAH  "iirspf^frsm  jsloot  fH  h 9»ttor 

62T8  - 1 srjrv-jLvslnrs.aRSSvJnnbSyeto^ipe  Hejeots 

6^79  - 1 »rlesd,aa  foUossz- 
1x4  Qk^iit  r Asorlnp  - 
3/4x4  "J”  i.«r4i%isn  - 


lx4»^/2  r siodow  Jt^ 

l-3/»fr=l/;:  Jsor  /arabs  - 
'^xt  - 15cr.l4  SO/ifi  .1  sA.i  to 
? X6  - 200,/lA  100^8  lOO/fO  .1. 


to  itd* 

1.  m te  Zb'S  ltd* 


8260  - 8 mrm  IxS  38  iAJM  " .•jrtpftTtrm  >jvort 

8^81  - 1 Ob.rlo»4t,aa  follows  - 

674x6  6 4/4x6^  ,1  Urnssad  - 

1x4  3%Bett<ir  ILsorla/r  - 
1 X 4 Jonmtm  loorlar  * 

3:42  - 1 o-rlstd.^>e  follows  - 10 Ao' 

6/4x4Se8**  JblPti-r  Jr^s*)Od  - 
574x446'*  " J*  •• 

f/4il-  A»tt  r aSj  - 
r/4.1-  '»r  323  - 
l/x4  1 JMTMm  >'lling  - 

3^8-w  - 1 o r lx4^:^"-9*sr  18'Jlii)tr  Oar  tidlnr 
6?84-./  - 1 " 1x6  f S ‘Jmntm  *'341  - 

8<.85-ff  - 1 " 1x6  ” • 

8286- '1  - 1 Jsnri<9n  iir''s»od  - 

X X 10  - locAo  a 1 

4 X 6 - 67^6  " 

8 X 6 - 40  l8  " 

8 X 8 - 60A6  •* 

1 X I - 100  16  Si  . 

6 X 0-1.  * ai  pa.i*  Lonr^L^t^f  .Ottfdi  rrimo  - 


LiTsrsd 

- 

jjc  - 

80.76 

- 

81  - 18.80 

70.00 

40  - 69.60 

66.00 

- 

” - 67.60 

£9.60 

m 

” - 20.00 

42.00 

- 

61  - 88.00 

69.00 

, ^ 

42.6  - 60.00 

67.76 

«s 

- - 60.00 

89.60 

SS 

” - 81.00 

91.£6 

m 

" - 83.00 

30.60 

m 

- - -8.00 

36.60 

m 

" - 87.00 

^8.60 

m 

40  - 19.00 

76*T>0 

a*60 

86.50 

71.50 
43«00 


ac»76 

30.00 


- 56^ 

- 60.00 
— 23.00 


24  - 70.00 
«*  - 6b.00 
" - 80.00 
••  - ::.00 
•*  - 40.00 

- 60.00 
48.6  - 16.00 
4>.6  - :^  0.60 


L9.00 

ao.00 

27.00 

30.00 

46.00 

:4.0c 


13 


.■*  *»/•  ••  '' 
%'  - f-  ■ 


1 

4 


•f 


DAILY  SALES  REPORT 


Fill  in  your  Sales  (Orders  Received)  on  this  blank  and  mail  EVERY  DAY  to  the  North  Carolina  Pine 
Association,  Norfolk,  Va. 

In  DELIVERY  column  under  RAIL  show  the  RATE  BEYOND  Norfolk,  and  under  the  heading 
WATER  show  POINT  of  delivery — such  as  Phila.,  N.  Y.,  Long  Island  Sound,  etc. 

In  TIME  OF  SHIPMENT  column  state  if  sale  is  made  for  Future  Shipment,  Contract,  etc.  When  no 
time  is  shown  in  this  column  it  will  be  understood  the  order  is  for  Prompt  Shipment. 

Enter  PRICE  under  the  Proper  Price  Column,  it  being  understood  that  the  terms  “Less  5%”  and 
“Net”  refer  to  the  matter  of  Commission  and  have  no  bearing  on  the  customary  cash  di.scount. 

The  number  below  is  your  identification  in  the  Secretary’s  office.  You  need  not  sign  this  report. 


i Quantity 

DESCRIPTION 

DELIVERY 

PRICE 

— 

Ordered 

Feet 

(Give  full  pcrtieulars,  usinR  as  much  space  as  necessary) 

Rail  Rate  Point  , 

Over  Nfk.  Water  | 

Shipment 

Wholesale 
Less  5% 

Direct 

Net 

North  ( aroi.ixa  1*ink 


ASS(  K'lATION 


DAILY  SALES  REPORT 

10  Members  Reporting  (7  of  these  November  30 

made  no  sales) 


1920 


I 

Ouanmy  i 

Ordered  [ 

Feel 


DESCRIPTION 


lOOM  4/4  7r2Sdge  Box 
15  6/4  Stock  Box 

11 5M  total  rough 

20H  2-t"  5'c.  #3  Pig. 

10  7/16  X xi.W.  Clg*  #3 

10  7/1 6 X " ” ^f4 

10  3/8  X ” ” 

10  3/8  X " " Tf4 

60M  TOTAL  DRS8S3D. 


POINT  OF  DELIVERY 
P,nil  Water 


Balto . 


.Uorfolk 


Hew  York 
Norfolk 


Wholesale 
Less  5% 


$ 42.50 
:27.50 
40  .00 
85.00 


Direct 

Net 


30.50 

37,00 


53.00 


T ime  of 
Shipment 


List  of  Members  Reporting  Today; - 


Argent  Lumber  Co., 

Camp  Mfg,  Co . , 

Conway  Lumber  Co., 
Bargan-Wagoner  Co . , 
Eureka  Lumber  Co « 
Foreman-Blades  Lbr.  Co., 


Hilton  Lumber  Col,  | 
Greenleaf  Johnson  ^br»  Co.^ 
Rowland  Lumber  Co . ^ | 

Surry  Lumber  Co . | | 


I 


i 


4 


I 


I 


allowances  that  have  been  made  eitlicr  directly  or  indirectly. 


i 

i 


i 

i 


i 


i 


\ 


I 


1 


Sales  of  Steel  drums  and  Steel  Barrels-Steel  Barrel  Manufacturers  association 


I 


THE  UNIIED  STATES  POTASH  PRODUCERS’  ASSOCIATION 


Producer’s  Monthly  Report  of  Pro<luction  and  Sales 


P'or  the  Month  of 


Company 


Name  or 
Salt 


PRODUCTION 


Tons  Salts  I Tons  KjO 


Sold  and 
Shipped  (*) 


■ Prior  Sales 
Shipped  (*) 


Sold  for  Future  Delivery  (*) 
Tons  K|0  I Delivery  Date 


Price  per 
Unit  K,0 


Terms: 

(f.  o.  b.  planri 
delivereil 
fCastern  points, 
etc.) 


Sulphate 


: Nebraska  (4) 


1 either (pleasej 
specify)  I 


— KXFLANA rORY  NOTES  — 

(1)  In  this  column  enter  only  potash  both  sold  and  shipped  during  this  month. 

(2)  In  this  column  enter  only  potash  sokl  prior  to  this  month,  for  future  delivery,  and  shipped  during 

this  month. 

(3)  In  this  column  enter  only  potash  sold  during  this  month  for  delivery  later  than  this  month. 

(4)  Nebraska  producers  will  please  enter  any  muriate  or  .sulphate,  produced  by  them,  under  the 

appropriate  headings,  and  not  under  “Nebraska,”  which  is  reserved  for  the  mixed  salts 
usually  produced  in  that  field. 


,r 


L 


. ..  ' ■ 

' 

O 

UNITED  STATES  MILLS 

WEEKLY  MARKET  REPORT 

To  be  mailed  on  Monday  of  each  week  to  the 
News  Print  Service  Bureau 
18  East  41st  Street,  New  York 

Report  of 

For  Week  cntlinc: 

CURRENT  SALES 

FOB  .Mill 

. 

' DOMESTIC 

L.  C.  L. 

i Rolls 

Standard  Print 

, 

- 

Counter  Rolls 

Side  Runs,  or  No.  2 
White  Manilla 

1 

' 

Sheets 

Standard  Print 

- 

■ 

No.  2 White  IManilla 

i 

Hanging 

Total 

FXFOR r 

T,  FOB  Seaboard 

Price  Port 

Rolls 

Standard  Print 

• . * T'' 

19 

Sheets 

Standard  Print 

Total 

(OVlRi 

1 


\ 


0. 


„ p 0 R T 
phio. 


0 F 


LOCAL 


P R 1 C E J.  ■ 

Nov.  33,  1920, 


NOTE:*  This  report  is  issued  to  supply  accurate  inforTiation,  that 
those  soliciting  business  in ‘this  territory  may  do  so  intelligently. 
There  is  NO  RESTRAINT,  implied  or  understood,  as  to  the  prices  at 
which  anyone  may  quote  his  products.  Prices  stated  below  are  LOCAL 
IN  LESS  THAN  CARLOAD  LOTS,  to  retailers,  as  of  date  of  Nov.  20,  at 
points  named.  Flour  basis  24^  paper j Feed,  bulk;  Chop  per  ton  in  lOOs 
2Aeal  in  sax  per  lOOs;  Wheat  and  Corn  per  Bu. , ALL  PRICES  CASH. 
PATENT  STR  CLR 


LOCATION 


Ashtabula 

1090 

1030 

Apple  Creek 

BllOO 

1060 

Alliar  e 

B1160 

1100 

Ada 

1140 

Attica 

1120 

1080 

Athens  B, 

1060 

" J. 

1060 

Beloit 

1160 

Bethel 

1120 

1080 

Botkins 

1050 

Bowling  Green 

11  25 

Buckeye  City 

1100 

Canal  Winchester  1040 

1000 

Chagrin  Falls 

1180 

1075 

Clarington 

Columbus  w. 

1200 

1120 

Cqldwater 

,1060 

Cortland 

1100 

Crestline 

BllOO 

1080 

Dayton  D. 

1170 

E. Liverpool 

1200 

Forest 

1080 

Freeport 

1120 

Gallipolis  BB 

1100 

II  R. 

1100 

1 B&S 

1100 

Georgetown 

1040 

Gibsonburg 

1160 

Granville 

1040 

Hamilton 

1175 

1050 

Johnstown 

1170 

Junction  City 

1050 

Lancaster  D. 

1060 

Lima 

1200 

1100 

London 

1140 

Mansfield  M. 

990 

Marion 

1095 

1055 

Jiiddletovm 

1060 

Milford  Center 

1100 

iiniersbuxg 

1100 

Mcwrystown 

1080 

1110 

New  Bremen  K. 

No.'  Bwltimole 

1200 

1140 

Nor,valk 

B1200 

Oak  Harbor 

B1240 

Painesville  N. 

1080 

1020 

Pedro 

Piqua 

1100 

1125 

Portsmouth  H, 

prospect 

1080 

1040 

Ravenna 

1060 

St.  Paris 

1060 

Salem 

B1200 

Sandyville 

1140 

Sardinia 

1130 

So.  Webster 

1050 

Stoutaville 

1000 

Sugar  Grove 

Tiffin  B. 

1130 

" L. 

1160 

1120 

Utica 

1100 

Upper  Sandusky 

LES 

1050 

1010 


900 


900 


926 


1000 


1000 


900 


1100 


1060 


MDS 

MXD 

bran  chop  MEAL 

WHEAT 

CORN 

#1 

60 

50 

52 

400 

270 

190 

50 

45 

400 

200 

60 

50 

55 

300 

195 

50 

180 

65 

54 

50 

400 

12'-' 

58 

56 

46 

340 

60 

50 

340 

64 

50 

50 

350 

280 

190 

90 

50 

48 

50 

250 

180 

80 

60 

50 

175 

56 

60 

50 

50 

400 

300 

175 

60 

185 

85 

60 

565 

50 

40 

300 

280 

180 

65 

170 

50 

45 

60 

335 

185 

100 

56 

44 

50 

300 

200 

90 

52 

43 

300 

175 

56 

60 

50 

300 

250 

300 

50 

40 

190 

52 

44 

58 

350 

280 

190 

70 

70 

45 

60 

400 

325 

200 

58 

47 

52 

300 

220 

125 

SO 

55 

50 

50 

400 

200 

60 

52 

50 

260 

210 

100 

57 

50 

230 

213 

80 

58 

48 

260 

210 

100 

45 

45 

350 

180 

125 

55 

50 

180 

60 

45 

300 

185 

60 

50 

40 

? 80 

^ ' * 

60 

50 

380 

1 30 

65 

58 

55 

400 

190 

90 

67 

48 

60 

320 

190 

70 

50 

48 

46 

40 

300 

200 

30 

48 

40 

70 

280 

200 

65 

180 

43 

38 

45 

295 

187 

70 

54 

44 

280 

185 

100 

60 

55 

350 

200 

75 

60 

50 

190 

60 

58 

56 

400 

190 

100 

56 

44 

300 

180 

100 

50 

45 

50 

300 

250 

175 

80 

60 

50 

350 

200 

200 

74 

64 

47 

50 

325 

250 

190 

100 

50 

50 

200 

90 

58 

45 

300 

175 

80 

55 

45  _ 

50 

260 

240 

200 

75 

46 

42 

60 

30b 

200 

190 

50 

59 

45 

49 

400 

250 

195 

53 

43 

375 

170 

54 

70 

60 

225 

60 

50 

65 

400 

190 

100 

GO 

55 

50 

60 

300 

275 

180 

80 

60 

50 

300 

280 

195 

90 

60 

50 

44 

160 

60 

56 

48 

350 

350 

195 

75 

60 

60 

70 

360 

170 

70 

50 

52 

56 

340 

160 

115 

500 

I’.- 3 

7-3 

60 

50 

56 

400 

300 

- 190 

no 

V E R 

’-,:--IT,iv  2 0 


W 


1^'  I 


American  Hardwood 
Manufacturers’ Association 

OPEN  COMPETITION  PLAN 

SALES  REPORT 


(Kfic*,  Saak  of  Commoteo  ft  Tratt  C«.  BUg.,  Mtapkit,  T« 


; EnitaC  JaMtfy  31.  1929 


Actual  Sales  of  Hardwoods 

As  reported  by  members  of  the  Open  Competition  Plan 
For  week  ending  January  31.  1920 

SOUTHERN  TERRITORY 
Gum 

FIRSTS  AND  SECONDS  QUARTERED  RED  GUM 
FIGURED  WOOD 


SOLD  BY  of  SsUe 
•151  Sondheimer  1/26 


DESTINATION  or 
FEET  THICKNESS  TEBRITORY 


15,000  4/4" 


Pacific  Coast 


®t.3  Scej 
QPUO  PWU  Oo<d 

232.00  211.00  211.00 


No.  1 COMMON  AND  BETTER  QUARTERED  RED  GUM 
FIGURED  WOOD 


• 59  NewDeemer  1/28 


15,000  4/4" 


Mississippi 


203.50  206.75 

178.50  181.75 


FIRSTS  AND  SECONDS  QUARTERED  RED  GUM 


•169 

H.  Ridge 

1/28 

75,000 

4/4" 

Elmira  Ty 

215.00  207.75 

200.25 

150 

Alex.  Bros. 

1/15 

15,000 

4/4" 

Cincinnati 

188.50  186.25 

71 

Kraetzer 

1/29 

© 15,000 

4/4" 

Virginia 

211.00  207.00 

105,000 

• 32 

Pritch-Wh. 

1/26 

8,000 

5/4" 

Kansas 

190.00  186.75 

186.76 

• 67 

Faust 

1/26 

4,000 

6/4-8/4" 

Mississippi 

210.00  213.00 

•169 

H.  Ridge 

1/28 

37.500 

8/4" 

Elmira  Ty 

245.00  237.00 

237.00 

©Kraetzer-Cured,  Selects  at  191.00 

No.  1 COMMON  AND  BETTER  QUARTERED  RED  GUM 

• 44 

Rash 

1/53 

15,000 

8/4" 

North  Carolina 

240.00  233.00 

220.00  213.00 

321 

Lamb-Gary 

1/24 

7,500 

8/4" 

Huntington,  W.Va. 

211.00  206.75 

181.00  176.75 

•240 

Bellgrade 

1/23 

13,000 

8/4" 

North  Carolina 

245.00  239.00 

225.SO  229.00 


35,500 

NOTE  • — Class  B — Sales  to  Consumers.  Actual  destination  not  reported 
Export  Fa'p?  RennrtPf’  on  ^nlro  Rate  Basis 

21 


Note  • ^ firit />Aqe)  ihe  erThte  7Cf  it 


i 


D.O. 

PagP  #1 


V7EST  COAST  LIMERMEN'S  ASSOCIATION 
SAI£S  REPORTING  DEPARTMENT 

DAILY  MARKET  BULIETIN  No.  I<87 


12/^7/feo 


DIRECT 


Total 

High 

Lcfft 

Volume 

Feet 

Price 

Feet  Price 

FLOORING 

M 

M 

M 

1 X U #2  VG 

19 

10 

55  00 

6 

51  50 

1 X U #3  SG 

8 

8 

24  CO 

1x6  #24B  " 

7 

7 

32  00 

FINISH  #24B 

ixS-io" 

i6 

1 

53  CO 

15 

51  50 

CEILING 

5/8x4  #24B 

22 

. 5 

28  25 

17 

28  00 

#3 

3 

3 

20  50 

1 X 4#3 

11 

11 

24  00 

DROP  SIDIKO 

5/8xb  #4 

6 

6 

15  00 

1x6  #243 

13 

13 

31  00 

RDSTIC 

5/8x6  #2&B 

10 

10 

32  50 

BATTENS  Lin, 

3"  Flat 

11 

11 

.75 

2i"  O.G. 

5 

5 

.95 

NAGON  BOTTOMS  Sets 

13/16x38  V.G. 

12 

12 

3 6o 

BOARDS  4 S/L 

1x4  SIS  #1 

5 

3 

l6  00 

1x6 

6 

4 

18  50 

2 

i6  50 

Rgh 

2 

2 

17  75 

1x8-10" 

62 

2 

19  50 

30 

17  50 

1x4&n  sis  #2 

8 

8 

13  50 

DIMENSION  S4E 

2x4  i2-ar~#i 

15 

15 

15  50 

PLK4  SHLTBRS 

4x4-6  125^:5“ s4s 

6 

6 

21  50 

3x10-12"  " " 

2 

2 

23  CO 

TimRS  Uhder  32* 

bxb/dxlO  S4S 

4 

4 

26  CO 

UTH  Fir- 

15 

10 

4 CO 

5 

3 75 

WHO 

' L E S A 

L E 

Brovalllng 
Foot  Prioo 
M 


If 


X7  28  CO 


30  17  50 


FLOORING 


1 X 4 #1  VG 

9 

9 

57  CO 

#2  " 

44 

5 

54  CO 

#3  ’’ 

10 

10 

33  CO 

1^x4  #24B  " 

5 

5 

55  50 

1x4  #24B  SG 

15 

15 

24  00 

STEPPIliG  #2&B 

2 

2 

6o  CO 

FINISH  #24B 

lx8-10" 

6 

5 

51  00 

CASG  4 BASE 

2 

2 

58  00 

CEILING 

■4x4  #24B 

5 

5 

26  50 

5/6x4  #24B 

5 

5 

31  00 

#3 

. 5 

5 

22  50 

1x6  #24B 

5 

5 

32  50 

DROP  SIDING 

1x6  f/24B  ■ 

8 

8 

31  CO 

BOARDS  4 S/L 

1 X 4 SIS  13A6  #1 

15 

15 

i5  00 

1 X 12"  " 

15 

15 

19  00 

1x6-8"  ” " #3 

30 

30 

i6  CO 

DIMENSION  S4E 

2x4  12-14  ■#! 

13 

13 

12  CO 

PLK  4 SlIL  TBRS 

4x4  12/i6  s4s 

1 

. 1 

i6  50 

CEDAR  SIDING 

^10  Clr  Ccl, 

6o 

6o 

70  00 

NOTE;  No 

Specified 

lengths  prices  are 

5 U9  CO 


1 50  CO 


’I“IT  ?.f 


Total  volume  for  day  in  Bulletin  and  detail  sales 
1 288  a$U  Ft. 


HERBERT  S.  BLAKE. 


THE  COTTON  THREAD  MANUFACTURERS’  EXCHANGE 


SKCRCTARY-TRIASUReR 


BULLETIN 


No,  162 


April  16,  1920, 


SUBJBCT:  RULING  PRICES 

To  All  Members •- 
Gentlemen: 

I sive  you.  herewith  in  the  oxuct  form  received 
a list  of  ruling  prices  which  i am  informed  have  been 
quoted  in  the  market 


INTRINSIC  4 Cord 
SILK  FINISH 
GHEY 

^ ^ ^0  12  16  20  24  30  36  40  50  60  70  80  90 

, 165  139  121  114  106  97  92  89  86 

600  832  605  552  490  411  358  337  312  288  271  263  2t5 

siSS  646  479  ®24  618  501 

4800  547 

6000  498 

7200  542 

9600  640  536 

12^)0  561  546  505  464  436  423  4C:^ 

Tubes  5^  lass.  Sort  finish  la!  less  per  2400  Yds  ~ — 


WHITE 

Nos,  8 10  12  16  20  24  30  36  40  50  60  70  80  90 

^ 166  140  122  115  107  98  93  90  87 

600  835  608  555  493  414  361  340  315  291  274  266  258 

^’2  623  573  540  524  507 

3600  547  481 

4800  549 

6000  500 
7200  545 

9600  644  540 

. . ,,  586  551  510  469  441  428  4j.< 

■ruDes  bf  less,  SoTt  finish  ij.  less  per' 24oo  yds. 

ex::ipit  23 

Ilote:  The  complete  report  is  comprised  of  8 pages. 


1 


■r. 

.1  _ : 

WEEKLY  REPORT 

* u. 

CUT— SHIPMENTS— ORDERS 

Member  No. 

To  NORTH  CAROLINA  PINE  ASSO., 

Norfolk,  Va. 

For  week  ended  Saturday 

t 

■ 

1. 

Accepted  orders  for 

__feet 

' . 2. 

Shipped  total  of  _ . 

__fe€t 

*> 

Actual!}'^  produced  during  week 

--feet 

4. 

Normal  output  per  day  of  hours 

--feet 

(If  this  infoi’mation  has  been  reported  before  you  need  not  answer 
again  unless  capacity  is  increased  or  decreased.) 

NOTE: 

No  signature  is  necessary  on  this  report. 

Return  it  MONDAY  in  stamped  envelope  herewith. 
Your  figures  will  be  held  strictly  confidential. 

Our  weekly  summary  will  b^  mailed  you  Thursday. 

• 

Estimate  cars  at  14,000  ft.  Rough  or  20,000  Dressed. 

MAIL  THIS  MONDAY 

' . 

24 

North  Carolina  Pine  Association 

NORFOLK,  VIRGINIA 


WEEKLY  BAROMETER 


WEEKLY  REPORT  OF 
ORDERS,  SHIPMENTS  AND  PRODUCTION 


PRODUCnOW 


ORDERS  isHiPrlENTS 


No.  102 

Norfolk,  Va.,  November  18th,  1920. 
For  Week  ending  Saturday,  November  13th,  1920. 

45  MILLS  REPORT; 

AVERAGE 
TOTAL  PER  MILL 

2,654,968  feet  58,999  feet 

4,976,168  “ 110,581  “ 

5,707,723  “ 126,838  “ 

12,726,000  “ 282,800  “ 


Orders__i.. 

Shipments 


Production 

Normal  Production 


Orders  below  Shipments 

Orders  > below  Actual  Production 

Shipments  below  Actual  Production- 
Orders  below  Normal  Production.— 
Shipments  below  Normal  Production 
Actual  Production  below  Normal 


Increase  in  Orders  compared  with  last  week 

Increase  in  Number  of  Reports  from  last  week 


PREVIOUS  REPORTS 


WEEK 

ENDING 


NO.  OF 
MILLS 


NORMAL 

PRODUCTION 


ORDERS 


SHIPMENTS 


PRODUCTION 


5,227,500  feel 


Total  3 month: 
Total  Year 
to  Date 


percentai^e  of  Production,  Orderri  and  Shipmen1.s  above  or  below  Normal 
h is  shown  as  “Base.”  or  100%, 


*r,  oriKinntrd  by  the  Brfrf)kmirc  Economic  Service  to  picture  Fundamental  Busi, 
used  by  this  Asaociati  o with  tlieir  permission. 


25 


Form  No.  1 


National  Association  of  Chair  Manufacturers  original 

To  be  returned 

Date  

Mr.  wm.  B.  Baker,  Secretary 
530  Monadnock  Building 
Chicago 

Dear  Sir:- 

FOR  YOUR  CONFIDENTIAL  INFORMATION.  WE  REPORT  THE  FOLLOWING  AS  OUR 
EXPERIENCE  IN  THE  MONTH  OF 


Chair  Groups  Dining 

Bed  Room 

Office 

Rockers 

Miscellaneous  TOTAL 

SHIPMENTS  $ 

S 

S 

S 

S 

$ 

ORDERS 

RECEIVED  $ 

$ 

$ 

$ 

S 

$ 

CANCEL- 

LATIONS S 

s 

$ 

S 

s 

$ 

UNFILLED 

ORDERS 

I of  thin  nu'nih  ^ 

$ 

s 

s 

s 

s 

' 

Firm 

Herewith  please  find  our  i 

L'heck  for 

10/100  of  r;  of  $ 

(Total  shipments  reported  aho\’e) 

5 

r 1920 

Number  of  PIECES  ShippeJ  above  nionlh  < 

i 1921 
’ I ’ 26 


,\.  B.  Failure  to  receive  this  rel’ort  by  soth  oj  month  uurumts  the  Secretary  to  remind  you  by  wire  with  charges  collect.  AccounLS 
not  fiaid  <o  days  from  date  of  invoice  will  he  penalized  y'  i of  iimoimt  unpaid  per  month.  Firm  name  and  amount  unpaid 
will  he  posted  by  bulletin. 


I 


Experience 

Chart 

of  50 

Chair  Factories 


PEOIXJCTIOIT  ASP  SALES  STATISTICS  AND  EEPORT 
OF  SPECIAL  QFJ0TATI0N5  FOR  TIE  MOZTTH  OF 
OCTOBER  IS 20. 

(a)  Percent  act’cal  QIJAIJTITY  production  to  Normal. 

(b)  Percent  actual  VALUE  production  to  Normal. 

(c)  Percent  actual  QUAZTTITY  SALES  to  Normal. 

(d)  Percent  actual  QUANTITY  2XKS  SLD  NEYf  USERS  to  Total  sold. 

(e)  Time  required  to  con^lete  unfilled  orders  and  contracts. 


Member 

(a) 



. (c) 

(d) 

_Jj 

e) 

Spcl 

Qaotn 

Filed 

Sales 
Below 
Li  st 

1 

149.4 

232.4 

146.3 

s 

to 

7 wks. 

2 

77.4 

120.1 

52.6 

24.4 

8 

to 

9 w^xs. 

1 

4 

107.3 

165.8 

74.1 

43.4 

8 

to 

9 '' 

5 

73.9 

113.2 

62.6 

12.6 

5 

to 

6 " 

6 

106.2 

153.9 

75.5 

13.3 

1 

to 

2 " 

7 

71.3 

116.7 

85.1 

36.3 

3 

to 

4 " 

8 

128.1 

138.2 

73.2 

11.6 

10 

to 

11  " 

11 

133.1 

199.9 

85.7 

25.2 

2 

to 

3 " 

13 

129.9 

194.2 

71.3 

3.9 

11 

to 

12  " 

14 

127.0 

142.0 

93.4 

12.4 

11 

to 

12  " 

Uhole 

Indus- 

105.9 

142.4 

67.3 

17.7 

9 

to 

10 

None 

1 

try 

( No  exchange  of  information  between  members.) 

qQq  _ _ — ------ 


MONTHLY  COIgARlSON  OF  PROUJCTIQN  AND  SALES  FOR  '.'NOLE 
INFJSTRY  FOR  YEAR  g-IDING  OCTOBER  30.  1920 


'"onth 

_la)_ 

(b) 

(c) 

(d) 

sj 

November , 

1919 

95.3 

105.3 

100.4 

19.3 

7 

to 

8 T. 

eeka 

December, 

ft 

104.0 

116.4 

111.9 

20.7 

7 

to 

8 

It 

January,  1220 

100.7 

101.9 

121.7 

20.7 

11 

to 

12 

It 

February, 

It 

92.0 

97.3 

99.0 

20.3 

11 

to 

12 

ft 

!.^arch. 

It 

99.4 

113.2 

110.2 

22.1 

12 

to 

13 

ti 

April, 

It 

56.0 

82.2 

119.5 

17. S 

14 

to 

15 

tt 

May, 

It 

113.7 

127.7 

100.6 

18.1 

14 

to 

15 

It 

June , 

ft 

110.4 

130.1 

97.3 

15.7 

13 

to 

14 

ft 

July, 

ft 

107.0 

126.9 

81.5 

15.0 

12 

to 

13 

ft 

Auffust, 

It 

107.1 

138.8 

74.5 

13.8 

11 

to 

12 

It 

Septer.'/oer, 

If 

lll.S 

150.4 

84.1 

14.7 

10 

to 

11 

n 

October, 

tf 

105.9 

142.4 

67.3 

17.7 

9 

to 

10 

ti 

Average 

100.3 

119.5 

97.3 

13.1 

■ ''f.  ' H''/ 

EXHIBIT  28 


i 


yi?  ^COO<^ 


C^  ' 


/ 


^/, 


6 3 . ^ y 


/V  ^(C/^ 


l 


V 


<t  Vi-C 


«y~- 


<^y  ^y  Qrr-yyt'^ 


1 


-i?./  V^ 

«••"■ ' '%'M:  ' t 

■-'  TacE  x** 


-5f  .->  r-V^  5 ^ ^ = ^.si^ft . ^)TSX3&  ,.» 

. ...  -■  V ^ 


<t  > 


■ ;.  j 


':n  '- 


'••y. 


0 ‘j  ■ '.'^  .,  *^  ..t 

V ' 

s 

“ ^ Y 

V 

)I  ■ ■ ‘ - 

‘I 

> \is 


> > 


- 1>^, 


.i  '.S#' 


*■. 


•i  ■ \\- ' 

sJJ^  nJi'v!  ^ 


^^3  ;o-^  .^.  V,  V , ^ ^ 

■.T' 


h »->w- 


,<■ 

►•'  J 


r ' 

\/ 


K)‘' 


STOCK  REPORT.  JANUARY  1st,  1920 

As  reported  by  the  members  of  the 

AMERICAN  HARDWOOD  MANUFACTURERS' ASSOCIATION 

MEMPHIS,  TENNESSEE 


NOTE — The  oversold  column  shows  that  some  of  the  members  are  oversold  on  these  various  items.  The 
Unsold  January  1st”  column  shows  that  some  of  the  members  have  these  various  aimounts  unsold. 


FIGURES  DENOTE  THOUSANDS 

GUM 


FIRSTS  AND  SECONDS  QUARTERED  RED  GUM 
FIGURED  WOOD 


ian  1 

Jan.  1 

Jan.  1 

Jan.  1 

Jan.  1 Over* 

Jan.  1 

Don.  1 

Stank  In* 

Ory 

Gretn 

Total 

Sold 

•rid 

Unsold 

Unsold 

•roaio 

r 

£K) 

3S 

12S 

as 

9 

109 

35 

74 

1 1/4"  

12 

10 

22 

3 

3 

0»> 

15 

7 

1 1/2"  

4 

4 

3 

3 

4 

4 

2"  

41 

n 

13 

3 

31 

26 

5 

21/2"  

12 

12 

12 

12 

3"  

3 

3 

3 

•> 

ToUl. 

1(!2 

48 

210 

47 

18 

181 

91 

90 

No.  1 COMMON  AND  SELECTS  QUARTERED  RED  GUM 
FIGURED  WOOD 


!"■  

73 

10 

83 

33 

50 

41 

9 

1 1/4"  

21 

21 

21 

9 

12 

1 1/2"  

10 

10 

10 

12 

2 

.VS* 

18 

IS 

11 

11 

18 

8 

10 

Total. . 

122 

10 

132 

44 

11 

99 

70 

31 

2 

FIRSTS  AND  SECONDS  PLAIN  RED  GUM  FIGURED  WOOD 


0/0 

V' 

100 

27 

12!7 

127 

129 

2 

1 1/4" 

20 

U) 

30 

30 

23 

7 

I 1/2" 

3 

3 

; . . 3 

3 

V 

13 

ini 

23 

23 

20 

3 

Total . 

136 

47 

183 

182 

177 

|0 

4 

No.  1 COMMON  AND  SELECTS  PLAIN  RED  GUM  FIGURED  WOOD 

1" 

176 

45 

221 

2 219 

1.54 

65 

J 1/4" 

13 

13 

13 

11 

2 

2" 



1 

1 

1 

3 

Total . 

190 

4.5 

235 

2 233 

168 

67 

n 

LOG  RUN  PLAIN  RED  GUM  FIGURED  WOOD 


Iv  nil"!  IT  31 

Ilote:  Tills  is  the  first  page;  the  entire  stock  report  comprises  63pages 


• * 


MONTHLY  REPORT  ON  SALT 


w- 


Name  of  Company . 

General  Office  Address  . . _ 

For  Month  Ending  - 

Number  of  days  of  24  Hours  operated  . _ _ Number  of  Men 

Report  must  reach  Detroit  by  Tenth  of  Month  succeeding  that  reported. 

MEDIUM  GRANULATED  PACKERS 

TONS  TONS  TONS 


TABLE  & DAIRY  TOTAL 

TONS  TONS 


Maximum 

Capacity 

Made  during 
Month 

Shipped  Blk. 
During 

Month  Pkgs. 

On  hand  end  of 
Month 


NOTE:-  Report  above  salt  of  your  make  only. 


MEDIUM 

TONS 


GRANULATED 

TONS 


PACKERS 

TONS 


TABLE  & DAIRY 
TONS 


TOTAL 

TONS 


Bought  during 
Month 

Shipped  Blk. 

During 

Month  ' Pkgs. 

On  h:  nd  end 
of  Month 


■NOTE:-  Report  here  all  purchases  of  salt  from  other  manufacturers. 

REMARKS:-  Give  here  your  opinion  of  months  business  and  prospect  for  near  future. 


DXSTRIOI  TV.’ELVS 
of  the 

HATIONAL  ASSOOIAIION  OF  -BOX  LlANUPAOTinGBS^ 


fcfc'  .h ' 


Report  of  business  conditions  for  month  of 


192^ 


unless  otherwise  stated,  answers  to  questions  should  be  based  upon  comparison  with 
preceding  month.  ’ 


lEAHCST  OPKDITIONS. 


1. 


What  is  the  trend  of  business  as  indicated  by: 

(Lighter (Lighter 

la)  Demand  on  |£anQ  Inquiries  on  (33^0 

Contracts?  (Heavier New  Business?  (Heavier 


(Higher^ 

(0)  Selling  (Sane 
Price?  (L^^, 


2.  Are  you  In  position  to  talce  additional  business?  If  so, 

(a)  How  much?  : (b)  What  class  of  boxes?_ 


3. 


List  average  prices  per  ll  feet  of  all 
Sales  during  the  month. 


] Average  price  per  Li  feet  for  the 

i month,  sales  in  lots  of 

t SO  boxes  t 100  : 500  : 1,000 


Material 

: or  less 

: boxes  ; boxes  ; boxes 

. Hade  up  ; 

; ; ! 

White  Pine 

t Shocks 

: Made  up  *. 

: ! : 

Cum  and  Yellow  Pine 

: Shooks  ; 

: 1 : 

: Made  up  : 

Poplar  and  Cottonwood 

: Shooks  : 

PAY/  I'lATSRIAL 

(Above  Romal?_ 

(a)  Is  your  lumber  stock  in  yard  and  purchased  (Nonaal? 


(Below  Normal?, 


(b)  For  what  period  are  your  entire  requirements  covered  by  purchases? 

(c)  *re  you  in  the  market  .now,  ( 11  feet  Llaterial 

and  if  so,  for  what  material  ( U feet  Material 

and  in  v/hat  quantity?  ( M feet  ___________  Material 

(d)  Do  you  wish  to  offer  any  of  your  lumber  stock?  If  so,  note  quantity 


and  description. 

M feet  of 

• 

5. 

(Lov/er? 

• 

(a)  Is  the  market  on  Box  Lumber  (Same? 

(b)  List  all  offerings  of  Bex 

(Higher? 

• 

Lumber. 

Offer  made  by  :■ Quantity 

! Description  ; 

price  per  M : f.o.b. 

\^at  point. 

1 : 

: r.ri^I’^IT  33! 

j ; 

: 

(0)  List  of  all  purchases  of 

Box  Lumber. 

Purchased  from  : Quantity 

! Description  : 

Price  Per  U s f.o.b. 

what  point. 

s ............. 

t 1 

; I 

! 

6.  Summarize  briefly  labor  situation. 


CffiNCRAL 

7.  Note  any  special  questions  you  desire  to  have  discussed  at  the  next  meeting. 


(Coir.pany) 


'D.  l^urr, 

1553  Conway  Luildinc, 

Chicago,  Illinois. 


Lclc’w  is  a 3tatcr.ient  of  hourly  rate  of  vvacos  pail  by  this  ccrapany  for 
the  various  classes  of  labor  indicated  durinc  the  month  of  1920* 

ELiDlcvo  Hour  Rate  of  V.'afces  Paid 


...  - m. 


Saw  Filar 


_Cents  per  hour- 


Rip  Sawyer 


Cut-off  Sav/yor 


ilaner 


It  M II 


i-lancr  Helper 


II  M ll 


Ra -Sawyer 


II  II  II 


Rfc-Sawj'er  Kolpcr 


Llachiuu  Uailer 


Llatchor 


It  If  If 


iratchor  Helper 


It  II  It 


Printer 


Ccr.v.xn  Labor  ) Factory 

(Except  V/omen)  ) 

) Yard  ... 


II  II  II 


II  II  II 


ii'craon 


ViC  are  payinf;  at  rate  of  _____ 
Our  factory  is  nov;  v/orRint:  cn  a 


for  overtime. 


hour  par  day  basis. 


Space  for  additional  remarks  in  explanation  of  wage  figures 


; SiG^!-  d ) 


' ■ f"'  X 

■i!"  <■  ^ ^ 


1 1)  ,■ 


Nortk  Carolina  Pine  Association 


(C’onctn  or  .\ur*.brrj 


1 StumpaKC  (HoarJ  Mfa“iire) 


2 I.tMiyiriK  Kxp;-nsf 


.'1  I.o;;  Transportation 


1 TOTAI.  ((1ST  Ol-  I.OtJS  AT  Mil. I. 

( l.inc^  1,  2,  anit  2.) 


II  l)r\  Kilns 


VarcMn  ' and  Sliippini; 


!>  TOT  \l.  ( (iST  OF  M Wl  i'A.t  TTUiNC 

il.a'.c'  t.  arm  7.> 


f 111:  lira  non  and  Ta\os 


10  Dipir-i  daliiin 


)i  (i<r..rai  0\  .idu-.d 


12  TuT  \I.  O’,  i lOiKAlt  ( O.Sr 

■ I ir'..-  S.  Jl*.  a -d  i i.l 


I : I o i.  ( o>i  •(;:  t:;i  i.i  '.Oiri; 

•l-.i.--  1.  . aim  I,:.. 


l-'j  i’iaaina  Mill  { i,s| 


I'i  l or \1,  COS  i ()!  ! i\ i.sjirr;  J r yiji  ij 

j i»  - M i-»l  .0., 


• . ’Yj  . • 


NORFOLK.  VA. 


Operatin((  Costs.  For  Month  of 


(«^ilh  Analyi  I-  > 


Total  for  the  .Mi/iilli 


AN  \i.VSIS 


Other  Kxpense.s 


. , .\v  rt».t 

Amourl  ..  p,. 


iCT'.i,  M''  ‘.il  I |•;,’')|lt  ( liii',  (>;  : > 


■'I  I'oru  iii;i  ■■■'i  o ..lO-.  i',;oi((  < sue,  .o. 


’■I  !:■;  '.ci:  :i  m';.  i oo  . 


Avrrser  < fit 
I>i  M.  r.. 


*. t \ N ? ri Vi: 

(J.r  M.  ':».i 


\(  i l M.  Kl  \ M\(;  I IM 

’ I . r I Ilf  Nil  nlh» 


I n.;r  I ■ VK  . 


Averajff  Cost 
Per  M.  Ft. 


BIBLIOGRAPHY 


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Federal  Reserve  Bank  of  Philadelphia,  How  Is  Basiness,  Philadelphia,  Federal  Re- 
serve Bank  of  Philadelphia,  1920. 

Federal  Trade  Commission: 

'l.  Report  on  the  Book-Paper  industry,  Washington,  D.  C. , 1917. 

3.  Report  on  the  Causes  of  High  Prices  of  Farm  In5)lements,  \ilashington, 

D.  C.,  1920. 

3,  Preliminary  Report  to  the  Senate  and  House  on  Lumber  Associations, 
V/ashington,  D.  C. , Jann^ry  10,  1921. 

Forest  Service,  The,  United  States  Departmert  of  Agriculture,  Timber  Depletion, 
Lumber  Prices,  Lumber  Ex^iorts,  and  Concentration  of  Timber  0\'/nership, 
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Hew  York  Joint  Legislative  Conraittee  on  Housing,  Record  of  Hearings,  Hew  York, 

1920. 

State  vs.  Arkansas  Lumber  Co.,  et  al.,  260  Mo.  212,  1914. 

United  States  vs.  American  Column  and  Lumber  Co.  , et  al. , Ho.  369,  U.  S.  Supreme 
Court : 

1.  Transcript  of  Record,  Supreme  Court,  October  Term,  1920,  Ho.  369. 

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Court,  October  21,  1980. 

3.  Brief  for  the  Appelants,  1920. 

4.  Brief  for  the  United  States,  Washington,  D.  C. , 1920. 

5.  Opinion  of  Judge  IvIcCall,  District  Court  of  the  U.  S. , Western  District 
of  Tennessee,  Western  Division,  J/larch  16,  1920. 

6.  Oral  Arguments  before  the  Supreme  Court,  October  21,  1920. 


United  States  vs.  American  Linseed  Oil  Company  et  al. : 


1.  Bill  of  Conrolaint,  filed  June  30,  1920,  Northern  District,  Eastern 
Division. 

2.  Answer  to  Bill  of  Conrolaint. 

United  States  vs.  Board  of  Trade,  246  U.  S.  231,  1918. 

United  States  vs.  Beading  Co.,  183  Fed.  427,  1910. 

United  States  vs.  United  States  Steel  Corporation  et  al.,  223  Fed.  55,  1915. 

1.  Transcript  of  Becord,  59  volumes.  See  especially  volumes  2,  3,  4, 
5,  6,  8,  9,  12,  15,  19,  20,  Defendants'  ExliiBits  3. 

2.  Opinions  of  the  Judges,  223  Fed.  55. 

United  States  Bureau  of  Corporations: 

1.  Farm  I, Machinery  Trade  Associations,  Washington,  D.  C. , 1915. 

2.  Trust  Laws  and  Unfair  Competition,  Washington,  D.  C. , 1915. 

II.  MISCET.LAI'TEOUS  PA’/IPHLETS,  BULLETINS  AND  DOCUilElTTS 
Ainsworth,  A.  A.,  Address  before  the  We  stem- Central  Association  of  Stove  Planu- 
facturera,  7,  1917.  (No.  p.  no- d. ) 

Amy,  Louis  W. , The  Leather  Belting  Exchange,  Address  before  the  Babson  Confer- 
ence on  Cooperative  Competition,  Sept.  29-30,  1915,  Philadelphia,  The 
Leather  Belting  Excliange,  1915. 

Babson,  B.  W. , Beports  on  Cooperation,  Wellesley  Hills,  Llass. , Babson' s Statis- 
tical Organization,  1915. 

Garside,  Alston  H. , The  Value  of  Statistical  Beports  in  Business,  Address  before 
the  Annual  Convention  of  Knit  Goods  I/Ianufacturers  of  America,  Utica, 
N.  Y. , Ivlay  20,  1920,  New  York,  Clark  IbKercher,  1920. 

Kellogg,  B.  S. , The  Legitimate  Functions  of  Trade  Associations,  Address  before 
the  Business  Secretaries'  Forum,  Chicago,  Jan.  25,  1918. 

Leather  Belting  Exchange,  By-Jjaws.  (No.  p.  no.  d. ) 


McKerche  r , Clark : 

1.  Open  Door  Coaptetition,  Address  oefore  the  National  Association  of 
Cotton  Ivlannf acturers,  Boston,  April  D8,  1915. 

2.  Decent  Literature  on  Coorisration  in  Business.  (No.  p.  no.  d. ) 

National  Coal  Association,  Illinois  Coal  Trade  Associations,  Washington,  D.  C. , j 

(no  d. , prohahly  1920.) 

New  England  Builders'  Supply  Association,  Annual  Official  Program,  Boston,  1917. 
Ohio  Millers'  State  Association,  The,  Directory  of  Ohio  Elour  Mills,  1920,  (con- 
tains copy  of  constitution),  Columbus,  Ohio,  Prank  H.  Tanner,  1920. 

Salt  Producers'  Association,  Articles  of  Association  and  By-Laws,  (no  p.  no  d.  / 
Society  of  Lknufacturing  Confectioners,  Constitution  and  By-Laws,  (no  p.  no  d. ) 
Steel  Barrel  Manufacturers'  Association,  Constitution  and  By-laws,  (no  p.  no  d. ) 
Spa^uLding,  V/.  V. , Experiences  in  Cooperative  Cornpetition,  Address  "before  the 

Bahson  Conference  on  Cooperative  Conraetition,  Sept.  15,  1916,  Phila- 
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Stevenson,  C.  E. , The  Elimination  of  Unfair  Competition,  Address  Before  t he  Nat- 
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1920. 

Tap  and  Eye  Institute,  Constitution  and  By-laws,  (no  p.  no  d. ) . 

Transactions  of  t he  National  Association  of  Cotton  Goods  Manufacturers,  Boston, 

1866. 

West  Coast  Lumbermen's  Association,  Constitution  and  By-laws,  (no  p.  1811.). 

III.  BOONS  A^ID  AETICIES 

Belt,  Eo"bert  E. , Inproved  Accounting  Miethods  and  Business  Practices.  American 
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Black  Diamond,  The,  How  National  Coal  Association  Reports  Sales.  Editorial, 


Oct.  1,  1919.  Vol.  63. 


M . VT  - i - . ' ■ • 'l^OC 


.jO’  l-r  .••u,*;^4^ 

03  o*vr*'.  f ' • . . 

1 

' s^  *'  .*.  :■  ...v'l . La- . ■-.•  1 

i • . . . “ 

■'  * *.r  4 .* 

■f • ;:  , \ : ' 

^ ‘ 4 i;/.; 

Braudels,  L.  D. , Cu.tthroat  Prices  tlis  Coii^jetition  that  Kills.  Harpers  HJeehly 
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Clark,  J.  B.,  The  Possiollity  of  Competition  in  Conmerce  and  Industry.  Annals 
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Coal  Age,  Open  Price  Bureau  and  Scheme  to  Sustain  Price  Declared  Unlawftil.  Edi- 
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Coffin,  ?/.  C.,  Cooperation  vs.  Unrestrained  Coirroetition.  Iron  Age,  April  23, 

1914.  Vol.  93. 

Eddy,  Arthur  J? 

1.  New  Competition,  Uorld’ s Y/ork,  October,  1911.  Vol.  23. 

2.  New  Competition,  VJorld' s Y/ork,  June,  1912.  Vol.  24. 

3.  New  CoEOpetition,  World*  s Work,  July,  1912,  vol*  24. 

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Fayle,  C.  Ernest,  Trade  Combinations  in  the  United  Kingdom,  Edinburgh  Eeview, 

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Annals  of  the  Anerican  Academy  of  Political  and  Social  Science,  July, 
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Francis,  Eobert  T. , Observations  on  the  Woolen  lilarket.  Journal  of  Commerce,  llay 
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•;i’  u\a.j  •x.i-t"  ;:-  • . 


*■> 


J 


^ ! 


♦\ 

I 


t ‘ 


4 > 


"0 


.-a 


2.  Open  Price  Plan  for  Woolens  and  Worsteds.  Textile  World  Jotimal, 
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Harley,  E.  Nt 

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Heating  & Ventilating,  Septemher  1916,  Voltune  13. 

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Jevons,  W.  S. , Theory  of  Political  Economy,  London,  IfeicMlllan  & Co.,  1888. 

Johnson,  Alvin  S.  Eeview  of  ”Hew  Competition"  hy  A.  J.  Eddy.  Political  Science 
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Levy,  F.  H.  The  Shernmn  Lav/  as  Affecting  Trade  Association^.  Domestic  Engineer- 
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Lord,  Fred  W.  The  EtMcs  of  Contract  ing  & Stabilizing  of  Profits.  New  York, 

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McKe  rche  r,  Clark: 

1.  Progress  Made  in  Applying  Cooperative  Competition  in  Testiles. 
Journal  of  Corrmerce,  January  3,  1917. 

2.  Open  Competition.  Testile  World  Journal,  December  9,  1916,  Volume 
52,  Part  1. 

Montague,  Gilbert  H: 

1.  Business  Competition  and  the  Law.  New  York,  London,  G.  P.  Putnam's 
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Moore,  0.  L.  The  C^en  Price  Plan.  The  Business  Secretaries*  Foru.m,  December 


1919. 

Nation's  Business,  The  Open  Competition  Plan.  Editorial,  April,  1920. 

Naylor,  E. H.  Trade  Associations.  New  York,  The  Ronald  Press  Company,  1921. 
Palgrave,  R,  H.  I.  Dictionary  of  Political  Economj'’.  New  York,  London,  Lfeic- 
Millan  and  Co.,  1910.  3 volumes. 

Rohinson,  M.  H.  Gary  Dinner  system.  Unpublished  Manuscript.  Champaign, 

Illinois. 

Rohrhach,  C.  E.  and  Liurphy,  • J.A.. 

1.  Qpen  Price  Associations.  Printers  Ink,  Jiuie  3,  1920,  Volume  III 

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2 volumes. 

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IV.  PERIODICALS 

American  Lumberman.  Chicago,  Weekly.  See  1912  et  seq. 

Chicago  Tribune,  Chicago,  Daily.  See  April  18,  1921. 

New  York  Journal  of  Commerce.  New  York,  Daily.  See  November,  1915  et  seq_. 

New  York  Times.  New  York.  Daily.  See  December  29  , 30,  1920  and  January  3,  1921. 
New  York  Tribune.  New  York.  Daily.  See  December  29,  30,  1920. 

Southern  Lumberman.  Nashville,  Term.  Weekly.  See  1912  et  seq. 

Textile  World  Journal.  New  York.  Weekly.  See  ISIS  et  seq. 

Wbrld,  Tlie.  New  York.  Daily.  See  September  13,  1920. 


I 

I 

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j 

f 


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. 0 


